Q1 2024 Cimpress PLC Earnings Call

Okay.

Yeah.

Welcome to the <unk> Q1 fiscal year 2024 earnings call I will introduce Meredith Byrnes, Vice President of Investor Relations and sustainability.

Thank you Tanya and thank you everyone for joining us.

With us today are Robert <unk>, our founder Chairman and Chief Executive Officer, and Sean Quinn, EVP and Chief Financial Officer.

I hope you've all had a chance to read our earnings document published yesterday. We appreciate the time that you have dedicated you understand our results commentary and outlook. This live Q&A session will last 45 minutes to an hour and will answer both pre submitted and live questions. You can submit questions lies with the other questions and answers.

As box at the bottom left of the screen before.

Before we start I'll note that in this session. We will make statements about the future. Our actual results may differ materially from these statements due to risk factors that are outlined in detail in our SEC filings and the documents, we published yesterday on our website.

We've also published non-GAAP reconciliation of our finance financial results and the outlook on our IR website, we invite you to read them and so now I will turn things over to Shaun for some brief remarks before we take questions.

Thanks, a lot Meredith and thanks to everyone, who has joined US today before we take questions I'll just highlight a few key points from the financial results.

And also the updated outlook that we published yesterday.

First of all we delivered solid results in the first quarter consolidated revenue grew 8% on a reported basis.

And 4% on an organic constant currency basis.

It did vary by segment and it was also reduced by approximately 200 basis points from year over year revenue timing changes.

Consolidated profits were very strong adjusted EBITDA grew $43 million year over year in Q1 to $89 million adjusted.

Adjusted EBITDA margin was up from six 5% last year to 11, 7% this year.

Benefitted from gross margin expansion from leverage in advertising spend and reduced operating expenses adjusted.

Adjusted EBITDA expansion over the last three quarters has been very significant our trailing 12 month adjusted EBITDA at the end of September was 383 million and that compares to $228 million at the end of December a 68% increase increase in just nine months and still with significant benefit from our prior cost reductions.

Yes, the impact those reported results.

Adjusted free cash flow for the quarter increased significantly year over year by just over $63 million with the higher adjusted EBITDA and also significantly more favorable net working capital compared to the year ago period, which was helped by returns to more normalized inventory patterns.

I won't go through all the segments here today, but given the significance of the profitability expansion in Vista, Let me just share some highlights there. This as revenue grew 6% on an organic constant currency basis overall revenue growth was driven by approximately even contribution from growth in orders.

And then higher average order values the higher average order value is driven by both product mix and pricing.

Revenue grew across geographic markets and across product lines with the fastest growth continuing to come from our promotional products apparel and gift category.

<unk> and packaging and labels.

There's a lot of investor focus on Europe. These days and I'll note that for Vista growth in Europe was quite strong in Q1.

This segment EBITDA grew $44 million versus last year, which similar to last quarter was driven by a balanced mix of revenue growth gross margin expansion lower advertising spend as a percentage of revenue which decreased.

And materially lower operating cost as a result of the cost reductions that we announced back in March.

Importantly in Vista. We're also seeing continued improvements in per customer value, which is a trend thats been in place for the past several years, but we're now also doing that while growing the customer base year over year, which grew by more than 100000 customers in the first quarter.

That was primarily driven by new customer growth and those new customers generated record levels of in quarter variable gross profit per customer when compared to past Q1, new customer cohorts there.

There are many small improvements that contribute to this and there remains a lot of opportunity for more of these improvements, which can have a meaningful impact on our overall customer experience conversion rate and financial results and Thats, where our focus is.

Unknown Executive: Welcome to the Simperous Q1 fiscal year 2024 earnings call.

Meredith Burns: I will introduce Meredith Burns, Vice President of Investor Relations and Sustainability. Thank you, Tanya, and thank you, everyone, for joining us. With us today, our Robert Keane, our founder, Chairman and Chief Executive Officer, and Sean Quinn, EVP and Chief Financial Officer. I hope you all had a chance to read our earnings document published yesterday. We appreciate the time that you have dedicated to understand our results, commentary and outlook. This live Q&A session will last 45 minutes to an hour, and will answer both pre-submitted and live questions.

From a balance sheet perspective, we ended the quarter with cash and marketable securities of $148 million, even after we purchased $21 million.

Notional value of our 7% senior notes.

Just under $20 million net leverage decreased sequentially to just over three five times trailing 12 months EBITDA as defined by our credit agreement as we've talked about on recent calls from a balance sheet perspective, we've been prioritizing reduction a reduction in net leverage and thats happening at a good pace.

Meredith Burns: You can submit questions live via the questions and answers box at the bottom left of the screen. Before we start, I'll note that in this session, we will make statements about the future. Our actual results made differ materially from these statements due to risk factors that are outlined in detail in our SEC filings and the documents we published yesterday on our website. We've also published non-gap reconciliation of our financial results and outlook on our IR website. We invite you to read them.

Moving to our outlook given our strong Q1 profitability and cash flow performance, we're raising our FY 'twenty for adjusted EBITDA guidance to at least $425 million and we continue to expect that to convert to free cash flow at approximately 40%.

Our organic constant currency revenue guidance of at least 6% remains unchanged. We recognize there are some macroeconomic uncertainty in most parts of the world and we will of course be monitoring that as it relates to future revenue commentary or.

Sean Quinn: And so now I will turn things over to Sean for some brief remarks before we take questions. Thanks a lot, Meredith, and thanks to everyone who joined us today. Before we take questions, I'll just highlight a few key points from the financial results and also the updated outlook that we published yesterday.

Our expectation is still to end the year with net leverage that is below three five times. So that also remains unchanged and with that Meredith why don't we open it up for questions you.

You bet Thanks, Sean.

Reminder, you can submit questions during the webcast via the questions and answers box at the bottom left of the screen. We also received many pre submitted questions with some overlapping areas, where I'll ask one or two represented questions where the answer will cover everyone's question.

Sean Quinn: First of all, we delivered solid results in the first quarter. Consolidated revenue grew 8% on a reported basis and 4% on an organic constant currency basis. Growth did vary by segment, and it was also reduced by approximately 200 basis points from year-over-year revenue timing changes.

We'll get to as many as we can and make sure we get to a variety of topics that are on People's mind.

Sean Quinn: Consolidated profits were very strong. Adjust the EBITDA grew 43 million dollars year-over-year in Q1 to 89 million dollars. Adjusted EBITDA margin was up from 6.5% last year to 11.7% this year. Disbenefitted from gross margin expansion, from leverage and advertising spend, and reduced operating expenses. Adjusted EBITDA expansion over the last three quarters has been very significant. Our trailing 12 months adjusted EBITDA at the end of September was 383 million, and that compares to 228 million at the end of December, a 68% increase in just nine months and still with significant benefit from our prior cost reductions, yet to impact those reported results.

First question.

And I'm going to throw it to Shawn so on a reported basis, Mr. Europe grew at 17% year over year, which we assume translates to 8% to 9% months FX effects are removed.

Thinking about this the right way and if so what is driving faster organic constant currency growth in Europe versus North America.

Yeah. Thanks, just so everyone knows in the call.

We published financial and operating metrics, each quarter, which we posted on our Investor Relations site, that's where the data is that would have prompted this question.

The constant currency revenue growth in Europe.

It was actually just about 10% is little higher than the math that whomever asked the question was doing.

Sean Quinn: Adjusted pre-cash flow for the quarter increased significantly year-over-year by just over 63 million dollars with a higher adjusted EBITDA and also significantly more favorable networking capital compared to the year-go period. Which was helped by returns to more normalized inventory patterns.

And that was indeed higher than in North America, but both regions performed well.

I would say that even beyond just the revenue growth in Europe being just above 10%.

Gross profit grew at a higher rate there and contribution profit grew at an even higher rate and so.

Sean Quinn: I won't go through all the segments here today, but given the significance of the profitability expansion in VISTA, let me just share some highlights there. This is revenue grew 6% on an organic currency basis. Overall revenue growth was driven by approximately even contribution from growth in orders, and then higher average order values. The higher average order value is driven by both product mix and pricing. Revenue grew across geographic markets and across product lines with the fastest growth continuing to come from our promotional products of parallel and gift category, signage and packaging and label.

Again overall, a very strong quarter for for Vista, but also in particular in Europe.

At a category level.

There is there is two areas to call out in terms of where performance was our growth was higher in Europe.

And that would be in packaging and labels and also in marketing materials. Those two categories happen to be the ones that benefit the most from leveraging new product introduction.

From fulfillment from other suppress businesses in Europe, which there is not that same opportunity in North America.

Sean Quinn: There's a lot of investor focus on Europe these days and I'll note that for VISTA growth in Europe was quite strong in Q1. VISTA's segment EBITDA grew $44 million versus last year, which similar to last quarter was driven by a balanced mix of revenue growth, gross margin expansion, lower advertising spend as a percentage of revenue, which decreased, and materially lower operating cost as a result of the cost reductions that we announced back in March.

The combination of the technology migration that we did last year, which just to keep in mind there.

The latest markets to be migrated where a few of our large European markets. So kind of the benefit of that is a little bit delayed.

And Theres also organizational changes that we put in place back in March I think the combination of technology migration and those organizational changes has allowed the team.

To have more focus in Europe, and also to move more quickly to have customer impact in those markets versus versus a year ago.

Sean Quinn: Importantly, in VISTA, we're also seeing continued improvements in per customer value, which is a trend that's been in place for the past several years, but we're now also doing that while growing the customer base year over year, which grew by more than 100,000 customers in the first quarter. That was primarily driven by new customer growth and those new customers generated record levels of encoder, variable gross profit per customer when compared to past Q1 new customer cohorts.

There were pretty meaningful improvements in customer credit rates that was notable in Europe.

Due to a lot of the work of our customer care teams. That's beneficial to revenue that was also a good trend in North America, just a little bit better in Europe.

And then I would say, we've also been able to take the learnings from other markets.

Sean Quinn: There are many small improvements that contribute to this and there remains a lot of opportunity for more of these improvements, which can have a meaningful impact on our overall customer experience, conversion rate, and financial results, and that's where our focus is.

From an advertising spend perspective perspective, but also in areas like pricing or how we're thinking about promotion Audi and bring those two.

Of our European markets in ways that we haven't before and that is that is definitely having an impact. So in general I would say, it's primarily micro factors rather than macro factors.

Sean Quinn: From a balance sheet perspective, we ended the quarter with cash and marketable securities of $148 million, even after we purchased $21 million, $1 million, a notional value of our 7% senior notes for just under $20 million, net leverage decreased sequentially to just over 3.5 times, trailing 12-month divita as defined by our credit agreement. As we talked about on recent calls from a balance sheet perspective, we've been prioritizing reduction in net leverage and that's happening at a good pace.

<unk> delivered the differential performance.

Great. Thank you Shawn alright, so we're going to stick with revenue here and we've had several questions trying to really sort of pick apart the differential growth rates by segment and some of the timing impacts there. So I'll ask one question and.

Touch on the other other questions that came in on this and you can cover all of them at once in detail. So in a lot of ways. It was a strong quarter, but revenue growth rates declined sequentially in all segments and are lower than your annual growth expectation.

Sean Quinn: Moving to our outlook, given our strong Q1 profitability and cash flow performance, we're raising our FY24 adjusted EBITDA guidance to at least $425 million, and we continue to expect that to convert to pre cash flow at approximately 40%. Our organic constant currency revenue guidance of at least 6% remains unchanged. We recognize there's some macroeconomic uncertainty in most parts of the world, and we'll of course be monitoring that as it relates to future revenue commentary. Our expectation is still to end the year with net leverage that is below 3.25 times, so that also remains unchanged.

The key contributing factors to that and given your continued confidence in the annual growth rate, whereas the decline this quarter expected and then the other questions around this are really getting at.

The growth rates in our upload and print businesses.

And why there was a difference between those two groups.

Yes, Okay I'll do my best here.

First of all agree with the overall sentiment.

I'll leave that it was a strong quarter profitability and cash flow were quite strong, but there was some variability in the revenue growth so I'll dive into that.

Meredith Burns: And with that, Meredith, why don't we open it up for questions? You bet. Thanks, Sean.

There as I had mentioned in the opening remarks, there is about 200 basis points of timing impacts to that are a drag on consolidated growth rate.

Meredith Burns: So as a reminder, you can submit questions during the webcast via the questions and answer stocks at the bottom left of the screen. We also received many pre-submitted questions with some overlapping areas where I'll ask one or two representative questions where the answer will cover everyone's questions. So we'll get to as many as we can and make sure we get to a variety of topics around people's minds.

Over half of that will benefit revenue in the remainder of the year.

As backlog normalizes, theres really nothing to that other than timing. So just know that that had some impact.

And then I would also just keep in mind that.

The expectations that we set coming into the year was that we were going to have lower growth.

Sean Quinn: So the first question, I'm going to throw to Sean. So on our reported basis, this to Europe grew at 17% year over year, which we assume translates to 8 to 9% once FX effects are removed. Are we thinking about this the right way? And if so, what is driving faster organic constant currency growth in Europe versus North America? Yeah, thanks. Just so everyone knows in the call, we published financial and operating metrics each quarter, which we post on our investor relations site, and that's that's where the data is that would have prompted this question.

And.

Particularly in our upload and print businesses as we lap pricing changes from last year and so on.

In terms of how we performed versus our expectations generally speaking, let's say Vista was right on plan other than the timing impact that I outlined we feel good about the quarter there.

The fact that per customer value continued to improve while customer counts.

<unk> grew as I noted I think is a good signal as well. So just it was right on track and solid solid quarter and upload and print.

Those.

Sean Quinn: The the consequences revenue growth in vista Europe was actually just above 10%, so it was a little higher than the math that whomever asked the question was doing. And that was indeed higher than in North America, but both regions perform well. I would say that even beyond just the revenue growth in Europe being just above 10%. Groose Profit, Groo at a higher rate there, and contribution profit grew at an even higher rate.

Both of those segments within upload and print each grew over 20% in Q1 last year in constant currency. So we're lapping that we're lapping pricing increases so it's still a tough comp.

But relative to expectations, there I'd say its a little bit more of a nuance story and you kind of have to get down to the country category channel level to better understand that.

There are in certain markets.

We're seeing either stable or increasing orders.

Sean Quinn: And so, again, overall, a very strong quarter for VISTA, but also in particular in Europe. At a category level, there's two areas to call out in terms of where performance was or growth was higher in Europe, and that would be in packaging and labels, and also in marketing materials. Those two categories happen to be the ones that benefit the most from leveraging new product introduction, from fulfillment from other Cimpress businesses in Europe, which there's not that same opportunity in North America.

But some indication of customers purchasing lower quantities per water and some categories to a little bit of a trade down there in some categories.

We also saw softer revenue trends in our reseller channels, which.

From an overall <unk> perspective is relatively small it's roughly mid single digits percentage of revenue for overall for <unk>, but it does impact the growth for some of these businesses in the upload and print.

Group and that's one reason that growth was lower for print group.

Within upload and print just because there's more concentration on a relative basis.

Sean Quinn: The combination of the technology migration that we did last year, which just to keep in mind, the latest markets to be migrated were a few of our European markets, so kind of the benefit of that is a little bit delayed. And there's also organizational changes that we put in place back in March. And I think the combination of technology migration and those organizational changes has allowed the team to have more focus in Europe and also to move more quickly to have customer impact in those markets versus the year ago.

In the reseller channel, especially in France.

That is a trend thats been present for some time.

And it's a trend that has benefited <unk> overall in the long term, but can weigh on growth in the near term for some individual businesses have more concentration. There. So we do expect that will continue to be somewhat of a headwind to near term growth for those businesses that have more concentration and resellers.

I think important to note that and upload and print despite lower overall growth segment EBIT is still grew year over year and that was helped by lower input costs.

Sean Quinn: There were pretty meaningful improvements in customer credit rates that was notable in Europe due to a lot of the work of our customer care teams. That's beneficial to revenue. That was also a good trend in North America, just a little bit better in Europe. And then I would say we've also been able to take the learnings from other markets, both from an advertising spend perspective, but also in areas like pricing or how we're thinking about promotionality, and bring those to some more European markets in ways that we haven't before. And that is definitely having impact. So in general, I would say it's primarily microfactors rather than macrofactors that deliver the differential performance.

That we've experienced so far this quarter and we expect that to be a feature for the remainder of the year as well.

I'm not going to get through all the other segments I think those are the most notable takeaways.

As mentioned in the question.

We held our revenue guidance for the year, there will be variability as we go throughout the year in terms of growth rates by quarter as we lap pricing and also as we've previously said, we expect the growth rate in the December quarter, and Vista to be weighed down somewhat by consumer concentration during the holiday peak, but based on what we've seen we still felt.

Confident leaving the revenue guidance untouched.

Thanks, Sean one more quick question for you Sean on revenue can you elaborate on the backlog that provided a $4 3 million dollar drag drag on revenues during the quarter was it isolated to one product category with its something that was broad based in nature and that within ADESA.

Sean Quinn: Great. Thank you, Sean. All right. So we're going to stick with revenue here. And we've had several questions trying to really sort of pick apart the differential growth rates by segment and some of the timing impacts there. So I'll ask one question and touch on the other other questions that came in on this and you can cover all of them at once in detail. So in a lot of ways it was a strong quarter, but revenue growth rates declined sequentially in all segments and are lower than your annual growth expectations.

Yes, we always have fluctuation in the backlog, which is the orders that we've received but we haven't yet shipped theres really nothing to read into on that one and its not specific to a category.

Sean Quinn: What were the key contributing factors to that? And given your continued confidence in the annual growth rate, was to decline this quarter expected. And then the other questions around this were really getting at the growth rates in our upload of print businesses and why there was a difference between those two groups. Yeah. Okay. I'll do my best here. First of all, agree with the overall sentiment. We believe that it was a strong quarter, profitability and cash flow were quite strong, but there was some variability in the revenue growth.

Those fluctuations has to do with things like what.

What's the last calendar day of the quarter end, but also things like timing of promotions as we crossed the quarter end our seasonality and.

And we don't try and manage that and any unnatural ways as we as we end the quarter from an economic standpoint, all of that really it doesn't matter and Vista, we receive the cash.

Front from customers.

And it's just that there was a higher level of orders not yet shipped on the last day of the quarter. So that will come into revenue when they do ship and thats really yet, but it does impact growth rate year over year.

Thanks, Sean.

Let's get Robert involved here and we've got some questions on the VIX customer additions. So the 100000 customer additions referenced in the earnings document could you add some additional context, such as what the percentage increase was what percentage of the total and then very similar question. You. Specifically noted that you grew its customer base.

Sean Quinn: So I'll dive into that. There's, I had mentioned in the opening remarks, there's about 200 basis points of timing impacts, too, that are a drag on consolidated growth rate. Over half of that will benefit revenue in the remainder of the year. As backlog normalizes, there's really nothing to that other than timing. So just know that that had some impact. And then I would also just keep in mind that the expectations that we set coming into the year were that we were going to have lower growth and particularly in our upload of print businesses as we lap pricing changes from last year and so on.

Year over year by more than 100000 customers does this represent a recent quarterly high for new Vista customer additions what is the size of the total Vista customer base currently.

Okay well. Thank you for the question first of all two words were usually are one is custom.

Sean Quinn: In terms of how we perform versus our expectations, generally speaking, I'd say Vista was right on plan other than the timing and impact that I outlined, we feel good about the quarter there, the fact that per customer value continued to improve while customer counts also grew. As I noted, I think is a good signal as well, so Vista was right on track and solid quarter. And upload and print, both of those segments within upload and print, each grew over 20% in Q1 last year in consequences, so we're laughing at, we're laughing pricing increases, so it's still a tough comp, but relative to expectations, there I'd say it's a little bit more of a nuanced story and you kind of have to get down to the country, category, channel level to better understand that.

Customer base and customer additions.

It really is a customer base that we referred to.

Repeat customers plus.

New customers.

In other words plus customer additions so it was good growth.

New customers drove that growth.

The number of new customers grew 13% versus the same quarter of the prior year.

Repeat customers were still down slightly year over year, but that is a trailing metric.

After the new customer acquisitions, and the trend in repeat customer count also improved sequentially. So we have overall growth in the customer base.

We don't go into a lot of details that you asked about specifically, but so let me give some additional context.

First of all.

Sean Quinn: There are in certain markets, we're seeing either stable or increasing orders, but some indication of customers purchasing lower quantities per order in some categories, so a little bit of a trade down there in some categories. We also saw softer revenue trends in our reseller channels, which just from an overall Simpress perspective is relatively small, it's roughly mid single digits per percentage of revenue for overall for Simpress, but it does impact the growth for some of these businesses in the upload and print group, and that's one reason that growth was lower for print group within upload and print, just because there's more concentration on a relative basis in the reseller channel, especially in France.

It is very important to keep in mind the customer count on its own is not the metric we seek to grow we certainly wanted to grow but it's not the only metric.

It's important to know that we care most of all about the profitability per cohort and to get to that you need to also look at how much gross profit per customer we are generating.

At worst over the life of a customer expressed NPV terms.

And what's the cost of customer acquisition relative to that lifetime value.

It's it's a factor in the equation, but it's not the.

The top number we're looking at that.

And that focus on economic value.

Holistically is y.

Compared to going back five years or so in our history for.

For the last multiple years, we have seen a reduction in customer count because we've moved away from the prior value proposition, which is based on very deep discounts.

Sean Quinn: That is a trend that's been present for some time, and it's a trend that has benefits of Simpress overall in the long term, a buck and way on growth in the near term for some individual businesses to have more concentration there, so we do expect that we'll continue to be somewhat of a headwind to near term growth for those businesses that have more concentration in resellers. I think important to note that in upload and print, despite lower overall growth, segment EBITDA still grew year over year, and that was helped by lower input cost that we've experienced so far, this quarter, and we expect that to be a feature for the remainder of the year as well.

Towards higher value customers and in some of our multiple investor days over the last couple of years, we've shown charts and data how we've greatly reduced economically negative results.

Our lowest decile decile and we strongly grow gross profit per customer overall, ending our topped ourselves.

And very much driven by our top decile.

We also over that multiyear period have.

Really reduced value destructive advertising, we've greatly reduced discounting and we have focused on higher value products.

Sean Quinn: I'm not going to get through all the other segments, I think those are the most notable takeaways. As was mentioned in the question, we held our revenue guidance for the year. There will be variability as we go throughout the year in terms of growth rates by quarter as we lap pricing, and also as we've previously said, we expect the growth rate in the December quarter, and VISTA to be weighed down somewhat by consumer concentration during the holiday peak, but based on what we've seen, we still felt confident leaving the revenue guidance on touch. Thanks, Sean.

Not we've done price increases, but even more so we've moved to higher value products.

<unk> price increases and all Q1 was a continuation of all of those trends gross profit per customer and this most recent quarters.

Acquisition cohort.

It was higher than it ever has been in the first quarter of any year.

The improving the repeat customers of course helps and we are happy about that and we are also focusing on driving repeat business by.

Sean Quinn: One more quick question for you, Sean on revenue. Can you elaborate on the backlog that provided a $4.3 million drag on revenues during the quarter? Was it isolated to one product category or was this something that was broad-based in nature, and that was in the VISTA system?

By giving better value to these customers.

And finally in terms of increasing the number of customers going forward. We're optimistic about this theres a lot has gone into this.

It's not just what we've done in the past one or two quarters.

Sean Quinn: Yeah. We always have fluctuation in the backlog, which is the orders that we've received, but we haven't yet shipped. There's really nothing to read into on that one, and it's not specific to a category. Those fluctuations have to do with things like what's the last calendar day of the quarter end, but also things like timing of promotions as we cross the quarter end or seasonality. And we don't try and manage that in any unnatural ways as we end the quarter.

Goes back to the multi year repositioning of the brand the increasing awareness of our product breadth.

Accelerating into growth areas of higher value products like promotional products.

Improving the customer experience.

And they have an earlier impact on value per customer with a clearly our improving our ability to acquire more customers.

And we're looking forward to seeing that continue.

Sean Quinn: From an economic standpoint, all that really doesn't matter. And VISTA, we received a cash upfront from customers, and it's just that there's a higher level of orders not yet shipped on the last day of the quarter, so that'll come into revenue when they do ship, and that's really it. But it does impact growth rate.

Thanks, Robert really exciting.

Andrea: Andrea. Thanks, Sean.

Development in Endesa Alright, Sean next question for you.

Thought our upload and print businesses, we're nearing the end of an investment cycle, but we were surprised to see the uptick in capital expenditures. This past quarter, what investments are we're making here and do we expect these to moderate.

Robert Keane: Okay, let's get Robert involved here, and we've got some questions on the VISTA customer edition. So the 100,000 customer editions referenced in the earnings document, could you add some additional context, such as what the percentage increase was, what the percentage of the total, and then a very similar question you specifically noted that VISTA grew with customer base year-a-year by more than 100,000 customers. Does this represent a recent quarterly high renew VISTA customer editions?

Yes.

Yes, Thats a good question.

The growth investment.

And our upload and print businesses.

Recent years has been relatively low but.

You are right to note that this past quarter from a capex perspective, it was definitely definitely a high capex quarter for these businesses and that's not a new run rate the equipment purchases.

That we make in those businesses in particular in the print group, which is as more vertically integrated than the other segment.

Robert Keane: What is the size of the total VISTA customer base currently? Okay, well, thanks for the question. First of all, two words were used there. One is customer base and customer editions. So it really is customer base that we referred to, repeat customers plus new customers, or in other words, plus customer editions. So it was good growth. New customers drove that growth. The number of new customers grew 13% versus the same quarter of the prior year.

Can be a little bit lumpy over time and it happened to be some large piece of equipment that were purchased this quarter.

There was also within that about $2 million of facilities related capex, which if that doesn't occur often and so thats sort of a sort of a one off.

But the rest of it is print production equipment.

Our investments that have clear payback and return thresholds.

That has to be met.

And some of that is maintenance capex as well so it wouldn't necessarily be captured in the growth investments that we that we outline each year. So.

Robert Keane: Repeat customers were still down slightly year-to-year, but that is a trailing metric after the new customer acquisitions, and the trend in repeat customer count also improves sequentially. So we have overall growth in the customer base. We don't go into a lot of details that you asked about specifically, but let me get some additional context.

Yes, higher intensity capex quarter for these businesses, that's not a new run rate.

There is some lumpiness there theres no change to our Capex guidance for the year.

And so that might be helpful. In terms of when you look at the Capex guidance that we provided for the full year and back off Q1, it would imply that.

Robert Keane: First of all, it's very important to keep in mind the customer count on its own is not the metric we seek to grow. We certainly wanted to grow, but it's not the only metric. It's important to know that we care most of all about the profitability per cohort, and to get to that, you need to also look at how much growth profit per customer year is generating, what's that worth over the life of a customer expressed in NPV terms, and what's the cost of customer acquisition relative to that lifetime value. So it's a factor in the equation, but it's not the top number we're looking at.

The rest of the year it does not have that level of intensity.

And so the quarterly run rate for the next three quarters will be lower.

Thanks, Sean and also thanks for the question, who asked that question, who is clearly looking at the detail in our financial and operating metrics that we posted on our website Alright next question Shine.

Costs are trending better than expected any additional color to share where are you seeing the biggest benefit.

Yes Jed.

Darryl input cost environment is definitely it continues to improve.

Robert Keane: And that focus on economic value holistically is why compared to going back five years or so history, for the last multiple years, we have seen a reduction in customer count as we've moved away from the prior value proposition, which is based on very deep discounts towards higher value customers. And in some of our multiple investor days of the last couple of years, we've shown charts and data how we've greatly reduced economically negative results in our lowest decimal or deciles, and we've strongly grown gross profit per customer overall, and in our top deciles and very much driven by our top deciles.

We've talked about this.

Back at Investor Day, a bit I would say even since then it has improved some.

Paper costs have been coming down after what was a very sharp increases that we experienced over the last two years.

And that's happening more quickly in Europe, the pace of the decreases happening more quickly in Europe than in North America.

And Thats definitely benefited gross margins.

In markets, where energy costs have really spiked last year those are.

Those costs were down meaningfully just as a point of reference in Italy, which was one of the countries where there was.

Most intense increase the cost per kilowatt hour is less than half of what it was in Q1 last year, so down quite a bit.

Robert Keane: We also, over that multiyear period, have really reduced value destructive advertising. We've greatly reduced discounting, and we have focused on higher value products. We've done pricing increases, but even more so, we've moved to higher value products before price increases. And Q1 was a continuation of all those trends, gross profit per customer in this most recent quarter's acquisition cohort was higher than it ever has been in the first quarter of any year, the improvement of repeat customers, of course helps, and we're happy about that.

Inbound freight costs are down meaningfully as well. So those are probably the three that I would I would highlight.

But as we noted in the release.

The changes have been slightly more favorable than what we planned for at the beginning of the year.

Also now incorporated into our guidance.

Great. Thank you alright.

One quick one here.

And then we'll move into some outlet question. So can you provide an update on the cost reduction initiatives Sean.

Yes, we gave quite a bit of detail back in March.

Call back then and when we had made those changes and just to recall the total benefit that that we'd expected from the cost reductions was about $100 million some of that.

Robert Keane: And we are also focusing on driving repeat business by giving better value to these customers. And finally, in terms of increasing the number of customers going forward, we're optimistic about this. There's a lot that's gone into this. It's not just what we've done in the past one or two quarters. It goes back to the multi-year reposition of the brand, the increasing awareness of our product breadth, accelerating into growth areas of higher value products like promotional products, improving the customer experience. And they had an earlier impact on value per customer, but they clearly now are improving our ability to acquire more customers. And so we're looking forward to seeing that continue.

<unk> got in FY2023.

And there's another $75 million of that $100 million, which was year over year benefit that we expected to get this fiscal year, which is roughly evenly split between the first three quarters.

We're on track with what we previously outlined as we entered the year.

The changes as it related to any head count impact those changes had already been made prior to the beginning of the year and then any decisions on things that were non compensation reductions at those.

Decisions were also made so it's really just a matter of the passage of time for us to see the remaining benefit over the next two quarters. So.

Maybe just two.

Robert Keane: Thanks, Robert, really exciting development and investor.

Put it plainly we are on track.

Great. Thank you.

Sean Quinn: All right, Sean, next question for you. We thought our upload and print businesses were nearing the end of an investment cycle, but we were surprised to see the uptick and capital expenditures this past quarter. What investments are we making here? And do we expect these to moderate? Yeah, this is a good question. The growth investment inter upload and print businesses and recent years has been relatively low, but you're right to note that this past quarter from a CAPEX perspective, it was definitely a high CAPEX quarter for these businesses.

Alright.

Sean a few quarters ago, we talked about how the consumer category remaining remain important for Vista.

Sean Quinn: And that's not a new run rate. The equipment purchases that we make in those businesses, and in particular in the print group, which is more vertically integrated than the print brother segment can be a little bit lumpy over time. And there happened to be some large piece of equipment that were purchased this quarter. There was also within that about $2 million of facilities related CAPEX, which that doesn't occur often.

So that is a dedicated team had been for them to focus on the category with the all important holiday season around the corner can you. Please give us an update on the outlook for consumer.

Sean Quinn: And so that's sort of a sort of a one off. But the rest of it is print production equipment. Those are investments that have clear payback and return thresholds that have to be met. And some of that's maintenance CAPEX as well. So it wouldn't necessarily be captured in the growth investments that we that we outlined each year. So yes, higher intensity CAPEX quarter for these businesses. That's not a new run rate.

We actually did have multiple questions on holiday outlook and that one is representative.

Yes sure.

To give some overall comments here.

We're not going to give a specific.

Holiday outlook, but it is an important part of the year.

From a consumer perspective.

It has come down overall in the mix at some price overall to less than 10% of our overall revenue.

The December quarter.

Is an important one from a consumer perspective, particularly in Vista, but then also and build a sign as well.

Consumer revenue declined in the last few years and some of that is just from a behavior change that happened through the pandemic, especially.

Invitations and announcements that's probably the most pronounced.

And what we've said recently is that the profit pool for consumer and Vista is a very important one and it's one that that we.

We want to protect and while there is opportunity for growth there first and foremost we want to protect that profit pool.

I think the question referenced a dedicated team we've always had a team focused on that category, but over the last year. We've also added some.

Sean Quinn: And there is some lumpiness there. There's no change to our CAPEX guidance for the year. And so that might be helpful in terms of, you know, when you look at the CAPEX guidance that we provide it for the full year and back off Q1, it would imply that the rest of the year does not have that level of intensity.

Specific product teams there so that they can continue to make focused improvements in the experience.

And also drive new product introduction thats targeted at that at that customer segment.

We've talked at our Investor day about just the pace of new product introduction overall, starting to increase and many of those products are relevant for consumer use cases as well they just need different content.

Sean Quinn: And so, you know, the quarterly run rate for the next three quarters will be lower. Thanks, Sean.

Sean Quinn: And also thanks the person who asked that question who was clearly looking at the detail in our financial and operating metrics that we post on the website.

A different merchandising like drink wear or apparel. So the category will benefit from overall new product introduction will also benefit from overall experience improvements on the site.

Sean Quinn: All right. Next question, Sean input costs are trending better than expected.

Sean Quinn: Any additional color to share. Where are you seeing the biggest benefits?

Sean Quinn: Yes, in general, input cost environments definitely continues to improve. You know, we talked about this back at investor day a bit, I would say, you know, even since then it's improved some paper cost coming down after what was, you know, very sharp increases that we experienced over the last few years. And that's happening more quickly in Europe, the pace of the decreases happening more quickly in Europe than in North America. And that's definitely benefited gross margins.

And as noted in our prior remarks, we're seeing we're seeing that that happen that will benefit consumer as well.

Many of the new products that we've launched especially in the.

Photo products home decor.

Of our.

Apparel guests are showing nice growth.

Although in Q1.

Consumer overall was basically flat year over year.

We do expect that.

From an overall perspective in the December quarter that consumer will still put some pressure on the Vista growth rate as we mentioned back in Investor day.

Sean Quinn: In markets where energy costs have really spiked last year, those are those cost are down meaningfully just as a point of reference in Italy, which was one of the countries where there was the most intense increase. The cost for a total of hours less than half what it was in Q one last, so down quite a bit. Embout break costs are down meaningfully as well. So this is probably the three that I would highlight. But as we noted in the release, the changes have been slightly more favorable than what we planned for at the beginning of the year. And that's also now incorporated into our guidance.

But there's a lot of improvements that we've been able to make over the last year. So the team's done a really nice job there in the planning just had a review the other day on all of that work.

Sean Quinn: Great. Thank you.

And and decline for the peak season.

Unknown Executive: All right. One quick one here.

Basically starts now so.

While consumer is not is not our primary focus from a brand perspective, it is still really important.

And frankly, we're also uniquely equipped to serve customers across both small business categories and consumer categories and.

When we look at the <unk>.

Customer customer value metrics.

Sean Quinn: And then we'll move into some outlook questions. So can you provide an update on the cost reduction initiatives? Sean. Yeah, we gave quite a bit of detail back in March in our call back then. And when we had made those changes and just for recall, the total benefit that that we had expected from the cost reductions was about $100 million. Some of that we got in FY 23. And there's another 75 million of that 100 million, which was year over year benefit that we expected to get this fiscal year.

Those hybrid customers small business and consumer are very valuable for us.

There is a lot of <unk>.

Creative that.

We've used in our mid and upper funnel channels that we're repositioning this time of year to be relevant for consumer again.

And that just like we were doing for.

For all of our brand advertising is really trying to demonstrate the breadth of the product offering.

And so you should see that over the next few weeks and months here.

Through the holiday season, So we are we.

Sean Quinn: There's roughly evenly split between the first three quarters. We're all in track with what we previously outlined. As we entered the year, the changes as related to any head count impacts, those changes had already been made prior to the beginning of the year. And then any decisions on things that were non-compensation reductions, those decisions were also made. So it's really just a matter of the past of time for us to see the remaining benefit over the next two quarters. So maybe just to put it plainly, we're on track. All right. Thank you.

We feel good about our plans we've made a lot of improvements and we're excited about the the weeks ahead here.

Thanks, Sean.

Alright, Robert a question for you have you seen any signs of prices softening in any of your end market.

No nothing broad based all of our businesses are constantly testing pricing. So there are some places where prices decreased.

So areas, where they went up so I would say this is normal course of testing and optimizing at this point.

Sean Quinn: All right. Sean, a few quarters ago, we talked about how the consumer category remaining remaining important for VISTA. So much so that a dedicated team had been formed to focus on the category with the all important holiday season around the corner.

Thank you alright.

Alright.

Sean.

Can you give the market increased confidence in achieving 2020 for EBITDA guidance are there any kpis that you'd be willing to share.

Sean Quinn: Can you please give us an update on the outlook for consumer. We actually did have multiple questions on holiday outlook and that one is representative. Yeah, sure. I'll give some overall comments here. You know, we're going to give a specific holiday outlook, but it is an important part of the year. You know, from a consumer perspective, it has come down overall and the mix, it's some press overall to less than 10% of our overall revenue.

Yes sure.

Well I'm not sure what we'll kpis will be helpful. In that regard hopefully even throughout the call so far.

There's been more granularity provided that is helpful and provides confidence.

We don't normally give.

Such specific guidance like we have in the last in the last quarters.

But back in the March quarter.

We provided guidance, which would be and then we raise the expectation for the June quarter.

We exceeded that and we increased our guidance for FY 'twenty four.

Sean Quinn: But the December quarter is an important one from a consumer perspective, particularly in VISTA, but then also in build a sign as well. In VISTA, consumer revenue has declined in the last few years and some of that is just from behavior change that happened through the pandemic, especially in invitations and announcements that's probably the most pronounced. And what we said recently is that the profit pool for consumer in VISTA is a very important one, and it's one that we definitely want to protect.

And we just delivered.

Strong Q1, EBITDA results also cash flow results.

And increased our guidance for the full year. So again, hopefully you should get confidence from that as well, but I think it's not kpis, but here's the math that I would focus on in terms of confidence in our full year guidance.

As I said in my opening remarks as of September we have $383 million of trailing 12 months' adjusted EBITDA.

I said in a response to an earlier question that we're on track with the cost reductions that we previous outlined.

Sean Quinn: And while there's opportunity for growth there, first and foremost, we want to protect that profit pool. I think the question reference to a dedicated team. We've always had a team focused on that category, but over the last year, we've also added some specific product teams there so that they can continue to make focused improvements in the experience and also drive new product introduction that's targeted at that customer segment. We've talked at our investor day about just the pace of new product introduction overall starting to increase, and many of those products are relevant for consumer use cases as well.

If you do the math on that those cost reductions, we said $75 million of benefit in FY 'twenty four.

Roughly ratably over the first three quarters, so theres still $50 million to come benefit that will come into the run rate over the next two quarters.

And then we said that we have currency headwinds this year of about $20 million for the year.

$3 5 million of that was in Q1. So there are $16 5 million left to go there.

So if you just add all that up.

You need to we need to deliver just under $10 million of EBITDA expansion over the remaining three quarters of the year from the flow through of growth to get to at least $425 million.

Sean Quinn: They just need different content or different merchandising like in drinkware or a power also. The category will benefit from overall new product introduction, it'll also benefit from overall experience improvements on the site. And as noted in our prior remarks, we're seeing that that happened and that will benefit, consumer as well. Many of the new products that we've launched, especially in the photo products, home decor, some of our, you know, apparel gifts are showing nice growth, although in Q1, our consumer overall was basically flat year-to-year.

Kpis, but basically in order to be confident in our guidance you need to believe that we can deliver just under $10 million of improvement outside of cost reductions that we announced in March and outside of currency impact whether that be from growth efficiency. So on.

We remain confident obviously that should.

Hopefully that's that's understood from the fact that we increased our guidance.

But that's the math that I would do to get comfortable.

Great. Thank you.

So a couple of other questions here, one of which was pretty similar I didn't want to which came in lives. Sean can you walk us through the puts and takes of the FY 'twenty guide, which calls for at least 8% year over year reported growth and 6% year over year FX neutral growth and what is baked into the guide in terms of the macro and.

Sean Quinn: We do expect that from an overall perspective in the December quarter, that consumer will still put some pressure on the VISTA growth rate, as you mentioned back in investor day, but there's a lot of improvements that we've been able to make over the last year, so the team's done a really nice job there in the planning, just had a review the other day on all that work, and the client for the peak season basically starts now. So while consumer is not, it's not our primary focus from a brand perspective, it is still really important, and frankly, we're also uniquely equipped to serve customers across both small business categories and consumer categories, and when we look at the customer, our customer value metrics, those hybrid customers, small business and consumer are very valuable for us.

Another revenue question I still don't understand how you get to 6% constant currency revenue growth for the full year at <unk> with 4% and Youre seeing in Q2 as a tough comp.

Two H you'd have to have.

There's some math here.

That 16% constant currency comp in Q3, a 9% comp in Q4 or what am I missing raising EBITDA guidance by $5 million is great, but did <unk> outperform more than $5 million were there any push outs of expenses from <unk> into the rest of the year.

Okay, a lot there let me, let me try and.

Sean Quinn: There's a lot of creative that we've used in our mid- and upper funnel channels that we're repositioning this time of year to be relevant for consumer again, and that, just like we were doing for all of our brand advertising, is really trying to demonstrate the breadth of the product offering, and so you should see that over the next few weeks and months here through the holiday season. We feel good about our plans, we've made a lot of improvements, and we're excited about the weeks ahead here. Thanks, Sean.

Trying to cover all of that so.

Just in terms of.

Puts and takes.

The first question.

Influence in the macro.

Yes, I'll walk through that bridge to get to our EBITDA guidance, just now and then the cash flow guidance just flows from that because we're talking about cash flow conversion off of that EBITDA.

From a macro perspective, we don't make specific predictions and.

Frankly, we don't have any better ability to forecast macro then.

People on this call so.

The way that I would think about in terms of the.

Robert Keane: All right, Robert, a question for you. Have you seen any signs of prices softening in any of your end market? No, nothing broad-based. All of our businesses are constantly testing pricing, so there are some places where prices decreased. There are also areas where they went up.

<unk> and takes in FY 'twenty for guide and also the macro I think it is helpful. If we actually start from the bottom of the P&L worked through a upwards.

And starting with Opex after the cost reductions and the focusing of investment that we did last year, we feel good about our opex levels those are.

Well under control and and we will continue to be managed very closely.

Robert Keane: So I'd say, this is normal, of course, of testing and optimizing at this point.

From an advertising spend perspective.

Unknown Executive: Thank you.

Sean Quinn: All right, Sean, to give the market increased confidence in achieving a 2024 EBITDA guidance, are there any KPIs that you'd be willing to share? Yes, sure. Well, I'm not sure what KPIs will be helpful in that regard. Hopefully even throughout the call so far, there's been more granularity provided that is helpful and provides confidence. We don't normally give such specific guidance like we have in the last quarters, but back in the March quarter, we provided guidance, which we beat, and then we raised the expectation for the June quarter.

There we made some decisions around focus last year as well we continue to experiment there those decisions are all within our control so feel good about that.

From a cost of goods sold perspective as I mentioned.

Just to an earlier question as well input cost environment is improving we do expect to experience those improved levels for the remainder of the year.

So feel good about that as well and then it comes down to revenue and that's frankly, where I'd say, we attempt to be appropriately realistic about the environment that we're in.

But of course, Theres always macro risks to some extent.

In terms of in terms of the all the math to get back to 6% constant currency growth.

Sean Quinn: We exceeded that, and we increased our guidance for FY 24, and we just delivered strong Q1 EBITDA results, also cash flow results, and increased our guidance for the full year. So again, hopefully you should get confidence from that as well.

The question the question is referring to.

What we'll be comping through the through the rest of the year.

And yes, we do expect there to be some pressure on Vista growth.

Sean Quinn: But I think it's not KPIs, but here's the math that I would focus on in terms of confidence in the full year. Guidance. As I said in my open remarks, as of September, we have 383 million dollars of trolling to a mass adjusted EBJ. I said in a response to an earlier question that we're on track with the cost reductions that we previous outlined, so if you do the math on that, those cost reductions we said would 75 million of benefit in FY 24, roughly radibly over the first three quarters.

From consumer we've talked about that there is nothing new in the December quarter.

But.

But other than that.

Yes.

Im going to walk through quarter by quarter revenue guidance or by segment.

We feel comfortable that that we can still get to that level keep in mind also that there are some of these timing impacts in Q1 as well and.

More than half of that will flip into revenue over the rest of the year so that helps.

Sean Quinn: So there's still 50 million to come of benefit that will come into the run rate over the next two quarters. And then we said that we would have currency headwinds this year of about 20 million for the year, 3.5 million of that was in Q1, so there's 16.5 million left to go there. So if you just add all that up, we need to deliver just under 10 million dollars of EBJ expansion over the remaining three quarters of the year from the flow through of growth to get to at least 425 million.

And then as we get to towards the back end of the year.

And.

It actually becomes an easier comp in parts of our business and so that will influence growth rates in part parts of our business as well so.

So listen I think overall.

Is there is there is there risk there always is because there is always uncertainties from a macro perspective.

But we've tried to be realistic about our expectations hopefully.

Sean Quinn: That's basically in order to be confident in our guidance, you need to believe that we can deliver just under 10 million dollars of improvement outside of cost reductions that we announced in March and outside of currency impact, whether that be from growth, efficiency, so on. We remain confident, obviously, that should, hopefully that's understood from the fact that we increased our guidance, but that's the math that I would do to get comfortable.

The way that we've performed over recent quarters as we've given this guidance.

Also kind of.

Shows that that's how we're that's how we're acting and we're trying to be realistic things can change, but we're going to try to be realistic and we will keep everyone updated on how we're doing against those expectations.

Thanks, Sean.

Alright.

Question on Vista profitability with Vista, adjusted EBITA margins coming in at 19% for the quarter, how should we think about the potential upside to your previously provided color at Investor day, which calls for 16% to 18% margins in FY 'twenty four.

Sean Quinn: Great, thank you. So a couple other questions here, one of which was pre-submitted and one of which came in live. Sean, can you walk us through the puts and takes us up by 24 guide, which calls for at least 8% year-over-year reported growth and 6% year-over-year effects neutral growth and what is baked into the guide in terms of the macro. And another revenue question, I still don't understand how you get to 6% constant currency revenue growth for the full year, if 1Q was 4% and you're seeing Q2 at the top comp, QH, you'd have to have, there's some math here, you'd have to have 16% constant currency comp in Q3 and 9% comp in Q4, what am I missing?

Yes.

Q1 results position us well within the context of that range that we talked about.

I think the one variable just to keep in mind, there is advertising spend as a percentage of revenue was at the low end of the range that we had provided in terms of annual spend.

I think it was a little bit under 15% 14, 5% or so.

And so that's one variable just to take into account from a from a margin perspective, we do expect that will fluctuate quarter to quarter.

Sean Quinn: Raising eva dot guidance by 5 million is great, but did 1Q outperform more than 5 million dollars where there are any push outs of the expenses from 1Q into the rest of the year. Okay, a lot there, let me try and cover all that. So just in terms of puts and takes the first question and influence of the macro, I walk through that bridge to get to our eva guidance just now, and then the cash flow guidance just flows from that because we're talking about cash flow conversion off of that eva.

But yes, I think the Q1 results position us well within the context of that range.

Thank you alright.

Alright question for you Robert what percentage of annual revenue or EBITDA is from business cards, only excluding stationary and everything else just isn't as much.

Much of the market still thinks impressed as thanks, Alison process. The business card company I know, it's been decreasing and I hope that the ask I noticed that that's as a percentage of revenue.

So I believe it is helpful to you disclosed that it's literally the first question I get when I bring up.

Okay well. Thanks for the question first of all let me be very clear.

Sean Quinn: From a macro perspective, we don't make specific predictions and, frankly, we don't have any better ability to forecast macro than people on this call. And so the way that I would think about in terms of the puts and takes in the FY24 guide and also the macro, I think it's helpful if you actually start from the bottom of the P&L, work the way upwards and starting with off-backs after the cost reductions and the focusing of investment that we did last year, we're still good about our off-backs levels.

Variable gross profit.

Gross profit and contribution profit.

After advertising of business cards.

Earl up in absolute dollars versus <unk>.

2018, before we started this.

Whole transformation of Vista.

Were all time highs in fiscal 'twenty three.

Q1 historical highs this quarter and.

It's very close to that from a revenue perspective, there is some differences there and I realize that the investor.

Sean Quinn: Those are well under control and we'll continue to be managed very closely. From an advertising spend perspective, there we made some decisions around focus last year as well. We continue to experiment there. Those decisions are all within our control, so feel good about that. From a cost of good sole perspective, as I mentioned in response to an earlier question as well, input cost environments improving, we do expect to experience those improved levels for the remainder of the year, so feel good about that as well.

Day, we gave a category that included stationary, but if you looked at just business cards.

But like I said is true.

Business cards revenue and business, our gross profit continue to grow in absolute dollar amounts.

That was true FY2023 versus FY 'twenty two it is true this past quarter versus the first quarter of FY2023.

The growth is in low single digits, each year, and we think it's going to continue like that.

Sean Quinn: And then it comes down to revenue and that's, frankly, where I'd say we attempt to be appropriately realistic about the environment that we're in, but of course there's always macro risk to some of us. In terms of all the math to get back to 6% constant currency growth, the question is referring to what we'll be copying through the rest of the year and yes, we do expect there to be some pressure on VISTA growth from consumer, we've talked about that, there's nothing new in the December quarter, but other than that, I'm not going to walk through quarter by quarter, revenue guidance or by segment, but we feel comfortable that we can still get to that level.

But we also recognize it's a market which is declining overall, but we're taking share.

Now for many years, we spent a lot of advertising reinforcing vistaprint not simply the vistaprint as a discount business card company.

So that was a perception and we have moved to waver that over the last multiple years.

And so we still get some of that perception.

The universe of investors, but.

Although we don't disclose in fact, we don't even calculate EBITDA by product, which was the question I think.

We do calculate the gross profit numbers in variable contribution profit I just described.

Now a couple of more thoughts on this.

Inside him price, obviously Vista has the most significant revenue gross profit from business cards.

Sean Quinn: Keep in mind also that there are some of these timing impacts in Q1 as well and more than half of that will flip into revenue over the rest of the year. So that helps and then as we get to towards the back end of the year and it actually becomes an easier comp in parts of our business and so that will influence growth rate in parts of our business as well. So listen, I think overall is there risk there always is because there's always uncertainties from a macro perspective, but we've tried to be realistic about our expectations hopefully the way that we've performed over recent quarters as we've given this guidance also shows that that's how we're acting and we're trying to be realistic things can change, but we're trying to be realistic and we'll keep everyone updated on how we're doing against those expectations.

We do.

There are about 25% plus or minus of this revenue base base as I mentioned other than during the pandemic, which a good fall, but they have consistently grown.

Unknown Executive: Thanks, Sean.

Why are they growing I think one people are using them and new customer our customers are using them and new use cases, QR codes are becoming very popular.

It's a very easy way to get someone to your website or your digital.

Yeah.

We have greatly increased the quality and the depth and breadth of our business card offering in terms of all the variations and we're finding that customers are buying.

Smaller volumes.

Business cards.

Much higher end products, which is leading to.

Order.

And value growth.

And.

Because we are selling at a higher price point higher gross profit than our traditional lead product. If you think of a very traditional vistaprint approach 510 years ago. It was 250 or 500 basic business cards with constant deep discounting often $10 1999 business cards for 50% off.

Unknown Executive: All right, question on Vista profitability. With Vista, adjusted EBITDA margins coming in 19% for the quarter.

We've moved away from that.

So.

Sean Quinn: How should we think about the potential upside to your previously provided color at investor day, which calls for 16 to 18% margins in FY24? Yeah, the Q1 results position as well within the context of that range that we talked about. I think the one variable, just to keep in mind, there is advertising spend as a percentage revenue is that the low ended of the range that we had provided in terms of annual spend.

I'd also say that some of these questions that investors have asked me come from our corporate setting and I think it's a different way.

People operate in a corporate setting versus the small business, who could use it again for loyalty cards in store at the Bakken for small e-commerce or other product sellers are making QR codes.

Sean Quinn: I think it was a little bit under 15%, 14.5% or so. And so that's one variable just to take into account from a from a margin perspective. We do expect that'll fluctuate quarter to quarter. But yeah, I think the Q1 results position as well within the context of that range.

Unknown Executive: Great, thank you.

The trends are very different.

Overall other businesses have far less revenue from that business cards national pen and build a signed basically nothing and upload and print it's closer to 5%.

Great. Thank you Robert Robert I'll stick with you for the next question, which is about the Wix partnership.

How do you think about digital offerings contribution to the business throughout the course of the year and where do you think it can grow over the medium term.

Robert Keane: All right, question for you, Robert, what percentage of the annual revenue or EBITDA is from business cards only, excluding stationary and everything else, just business cards? No, much of the market still thinks things, things, things of Simpress as the business card company. I know it's been decreasing and I hope that the asker knows that that's as a percentage of revenue. So I believe it's helpful to disclose that. It's literally the first question I get when I bring up in process.

Okay pretty sure. Your question is about financial contribution, but I just wanted to give the context of value proposition contribution.

And QR codes, we recognize of course in this world with physical digital connection of small business brands is important in many larger businesses. So having the wix partnership at Vista is very important to be relevant in that world because design marketing activities.

Robert Keane: Okay, well thanks for the question. First of all, let me be very clear, variable gross profit, gross profit, and contribution profit, after advertising of business cards are all up in absolutely dollars versus FY18 before we started this whole transformation of VISTA. They were all time highs in fiscal 23 and they were Q1 historical highs this quarter. And it's very close to that from a revenue perspective. There's some differences there. And I realized that the investor show a day we gave a category that included stationary.

Very much transcend that physical digital divide.

Or increasingly are removing that device.

Financially, we think we have an opportunity to grow to grow in the Wickes partnership because we're now fully migrated off of our legacy product. We have in this area. We're focused on optimizing the experience of a wix product, which is an excellent product.

For customers in the small business space and we think we're offering.

Our customers are product they like more but importantly.

Retention is strong and customer cash flows for us.

Robert Keane: But if you looked at just business cards, what I just said is true. So business cards revenue and business card growth profit continue to grow in absolute dollar amounts. That's true of FY23 versus FY22. It's true of this past quarter versus the first quarter of FY23. Now, the growth is in low single digits each year and we think it's going to continue like that. But we also recognize it's a market which is declining overall but we're taking share.

Even after.

Putting the split we do with wix or better.

<unk>.

We're looking at our very successful increases in retention rates. So.

Again, so far the transition has been the focus.

Off of the old product, we have now done the team. That's working on this is shifting their focus to building from here and these are very valuable customers for us.

The product is very relevant in today's world.

And we're optimistic.

Thank you Robert.

Robert Keane: Now, for many years, we spent a lot of advertising, reinforcing this to print, not simply as a different as a discount business card company. So that was a perception. And we have moved away with that over the last multiple years. And so we still get some of that perception in the universe of investors. But although we don't disclose, in fact, we don't even calculate EBITDA by product, which was a question, I think we do calculate the growth profit numbers and variable contribution profit I just described.

Let's shift to Sean can you remind us of our software capitalization policy and a lot of it do you expect capitalized software to remain at current levels or moderate given divestiture re platforming is behind that and if a moderation as expected would those outflows no longer be incurred when they shift back into the income statement.

Yes, yes.

Yes.

We expect capitalized software to be.

Either flat or slightly lower this year than it was last year last year's level was $58 million.

And Thats.

Last year's level was down from FY, 'twenty, two which was a high of $65 million.

Robert Keane: And now, a couple more thoughts on this. Inside the press, obviously, VISTA has the most significant revenue growth profit from business cards. But we do see them there, about 25% plus or minus of this revenue base base, as I mentioned, other than during the pandemic, which we did fall for they have consistently grown. Why are they growing? I think one, people are using them in new customers are using them in new use cases, QR codes are becoming very popular, which it's a very easy way to get someone to your website or your digital presence.

From in terms of the income statement part of the question.

If you're asking about the GAAP income statement.

The costs that we capitalize get amortized into the P&L over three years and so.

That reduction in capitalized software levels from what was that high of 65 million in FY 'twenty two down to what will be approximately the same as last year are probably a little bit lower to $58 million.

That difference.

We will benefit the P&L over time, because the amortization happens over time, so that that is a little delayed.

Robert Keane: We have greatly increased the quality and the depth and breadth of our business card offering in terms of all the variations and we're finding that customers are buying much smaller volumes of business cards. But it much higher end products, which is leading to a full order involved in value growth. And because we're selling these at higher price points and higher gross profits than our traditional lead products, if you think of the very traditional VISTA print approach five, 10 years ago, it was 250 or 500 basic business cards with constant, deep discounting, often $10 or $9.99 business cards for 50% off.

My guess is that the.

A question might be trying to get at.

Whether that reduction.

Effectively would reduce our EBITDA because the cost of those team members is just no longer capitalized will.

Or is there a true reduction and that won't have any impact on EBITDA in the answer there is that.

The reduction from those FY 'twenty two levels is primarily due to the cost reductions that we did in FY2023 which.

Did focus where we're investing but also did take advantage of areas, where we could make changes.

Post re platforming and so you shouldnt aspect.

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Robert Keane: We've moved away from that. So I'd also say that some of these questions that investors have asked me come from a corporate setting. And I think it's a different way people operate in a corporate setting versus a small business who could use it again for loyalty cards in the store as a box insert for small e-commerce or other product sellers. I make a QR code. It's a trend that are very different. Warren. Overall, other businesses have far less revenue from the business card, national pen and bill design, basically nothing, an upload in print. It's closer to 5%. Great.

This past week.

Robert Keane: Thank you, Robert.

Peter.

Great. Thank you alright.

Alright, So we've had a last question here.

I think Robert Sean will do great job answering it.

How are you leveraging technology data and AI and machine learning to improve customer experiences and drive growth across your lines of business.

So.

One were doing a lot.

I would.

Give a few examples now I'd really encourage you to go to our most recent Investor day, It's all online at our IR site.

Both the slides, but if you look at the script or watch the video.

Robert Keane: Robert, I'll stick with you for the next question, which is about the Wix partnership. How do you think about digital offerings, contribution to the business throughout the course of the year? And where do you think it can grow over the medium term?

Really get a good sense in much more detail that I can go into today, but.

Let me just touch a few points data is very important.

Robert Keane: I'm pretty sure your question is about financial contribution, but I just want to give the context of value proposition contribution. I just mentioned QR codes. We recognize, of course, in this world, the physical digital connection of small business brands is important and in many larger businesses. So having the Wix partnership at Vista is very important to be relevant in that world because design, marketing, activities are very much transcend that physical digital divide, or increasingly are removing that divide.

In our CTO at the group level Bassi.

This level.

Hope about technology and data.

Great extent, we have.

Millions of enrichment, where we improved the quality of data.

Customers.

Over 80 billion specific events that happened in upload and order payment etcetera, which all goes into.

Our data systems.

We use machine learning in many different areas, we started that.

345 years ago in early examples of how do you make.

Robert Keane: Now, financially, we have an opportunity to grow, to grow in the Wix partnership, because we're now fully migrated off of our legacy product that we had in Sierra. We're focused on optimizing the experience of a Wix product, which is an excellent product for customers in the small business base. And we think we're offering our customers a product they like more, but importantly, the retention is strong in customer cash flows for us, even after the split we do with Wix are better. And we're looking at very successful increases in retention rates. So again, so far, the transition has been a focus off of the old product we had.

Graphic uploads.

Resolution how do you.

Do background knock out over time that has gotten much broader than we were doing back in FY 'twenty and today, we're doing things like having insights into the designs our customers are uploading.

Powered template galleries.

The AI.

Information our capabilities, we have behind things like logo maker are all based on getting machine learning.

We're moving into.

Generally to our AI work for.

Adjusted and graphic design improvement design quality insurance customer service and a lot of other ways. So again.

Brief and rapid list of some of the things we're doing I'd encourage you to.

Robert Keane: Now that's done, the team that's working on this is shifting their focus to building from here. These are very valuable customers for us. The product is very relevant in today's world and we're optimistic. Thank you, Robert.

Look at our Investor day to get more detail.

Unknown Executive: All right.

Fantastic. Thank you Robert Alright, we have one more question.

That is on capital allocation, so Sean I get ready would you consider buying back term loan b seeing not the total interest on TLD is higher than the bonds, which are 7% fixed actually had a couple of questions like that.

Unknown Executive: Let's shift to Sean.

Sean Quinn: Can you remind us of our software capitalization policy? I love it. Do you expect capitalized software to remain at current levels or moderate, given the VISTA replatforming is behind us? And if a moderation is expected, would those outflows no longer be incurred, or would they shift back into the income statement? Yeah, we expect capitalized software to be either flat or slightly lower this year than it was last year. Last year's level was $58 million.

Sure and we've we've had a couple of questions like this in recent quarters. So that the answer will be very consistent with what we've said in recent quarters.

As of at the end of September the weighted average interest rate on our term loan B that was just under 8% seven 9% inclusive of swaps and so the non hedged portion of that.

It was higher.

Sean Quinn: And that last year's level was down from FY22, which was high of $65 million. In terms of the income statement part of the question, if you're asking about the gap income statement, the cost that we capitalized get advertised into the PNL over three years. And so that reduction in the capitalized software levels from what was that high of 65 million FY22 down to what will be approximately the same as last year or probably a little bit lower to 58 million. That difference will benefit the PNL over time because the amortization happens over time, so that depends on this little delay.

So yes, the current rates are higher for our term loans, which are variable rate and that's higher than the 7% coupon on our bonds, but.

Our bonds were trading at a deeper discount that our loans. So when you look at the yield the yield has been much higher for bond repurchases that was the case in Q1 to put that in perspective during the window that we were buying in Q1, our bonds traded between 93 and 94 and our average purchase price was nine.

3.6 or so.

And the U S dollar tranche of our term loan b traded closer to parks so that discount.

Out there.

The yield to maturity on our bond repurchases in Q1 averaged a little bit under 10%.

Sean Quinn: I guess is that the question might be trying to get at whether that reduction effectively would reduce our EBITDA because the cost of those team members is just no longer capitalizable or is there a true reduction and that won't have any impact on EBITDA. But also did take advantage of areas where we could make changes post re-platforming. And so you shouldn't expect that to be the reason to hear that swing neck as the EBITDA.

If you assume that we refinance our bonds in advance of the maturity than the actual yield goes up from there.

The bonds also mature two years before the terminal B. So we take term into account.

When were.

I'm trying to make these decisions as well it's.

It's not out of the question that.

That we would buy.

The term loan b, but these are some of the factors that we consider most notably yield and term.

Some others too.

Sean Quinn: Great, thank you.

So we'll continue to look at that and also the direction of interest rates, which obviously is an important input to us.

Thank you Sean Alright.

That brings us to the end of our questions and I'm going to hand things over to Robert to wrap up.

Thank you Meredith. Thank you to all the investors for joining the call.

Robert Keane: All right, so we've had a live question here and I think Robert or Sean will do a great job answering it. How are you leveraging technology data and AI and machine learning to improve customer experiences and drive growth across your lines of business? Yeah, so when we're doing a lot, I would give a few examples now.

Continuing to entrust your capital with us.

We look forward to delivering during the second quarter, which is our holiday peak as long as the rest of the fiscal year, we're off to a very good start we're excited to be leveraging.

Stronger set of tools and capabilities to deliver great customer experiences stronger really than we've had in years.

Robert Keane: I'd really encourage you to go to our most recent investor day. It's all online at our IR site where both the slides, but if you look at the script or watch the video, you really get a good sense in much more detail that I can go into today. But, you know, let me just touch a few points. Data is very important. Mark in our CTO at the group level, Basti at the VISTA level and spoke about technology and data in great extent.

We are also.

Really excited to continue on the path.

Path to grow our profits and cash flow very much in line with what we've been speaking about for the last year and to continue as we do so.

Nonetheless to invest in the development of new capabilities, new customer value propositions.

That will continue to build our intrinsic value per share.

Thank you again for your time and have a great day.

Ladies and gentlemen. This concludes today's conference. Thank you for your participation you may now disconnect.

Robert Keane: And we have little millions of enrichments where we improve the quality of data, our customers and over 80 billion specific events that happen in upload and order payment, et cetera, which all goes into our data systems. We use machine learning in many different areas. We started that three, four or five years ago in early examples of how do you make graphic uploads higher resolution? How do you do background knockouts over time that's gotten much broader than what we're doing back in FY 20.

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Robert Keane: And today we're doing things like having insights into the designs, our customers are uploading AI powered template galleries, the AI information or capabilities we have behind things like local maker are all based, getting machine learning, we're moving into generative AI work for suggesting graphic design improvement, design quality insurance, customer service, and a lot of other ways. So, again, that's a brief and rapid list of some of the things we're doing. I'd encourage you to look at our investor day to get more detail.

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Robert Keane: Fantastic. Thank you, Robert.

Okay.

Unknown Executive: All right.

Okay.

Yes.

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Unknown Executive: We have one more question.

Sean Quinn: That is on capital allocation. So, Sean, get ready. Would you consider buying that term loan B seeing that the total interest on TLB is higher than the bonds, which are 7% fixed. It's made a couple questions like that. Sure, and we've had a couple questions like this in recent quarters so that the answer will be very consistent with what we've said in recent quarters. As of at the end of September, the, the weight of the average interest rate on our term won't be that was just under 8%, 7.9% inclusive of swaps and so the non hedged portion that it was, was higher.

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Sean Quinn: So yes, the current rates are higher for our term loans, which are a variable rate. And that's higher than the 7.9% coupon on our bonds. But our bonds were trading at a deeper discount than our loans. So when you look at the yield, the yield's been much higher for bond repurchases. That was the case in Q1 to put that in perspective during the window that we were buying in Q1 are bonds traded between 93 and 94 and our average purchase price was 93.6 or so.

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Sean Quinn: And the US dollar charge of our term loan be traded close to the park so that discount was not there. The yield to maturity on our bond repurchases in Q1 averaged a little bit under 10%. Although if you assume that we refine our bonds in advance of the maturity, then the actual yield goes up from from there. The bonds also mature two years before the term won't be so we take term into account when we're trying to make these decisions as well.

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Sean Quinn: It's not out of the question that that we would buy a term won't be, but these are some of the factors that we consider most notably yield and term. There's some others to and so we'll continue to look at that and also the direction of interest rates, which obviously is an important input to this.

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Unknown Executive: Thank you, Sean.

Robert Keane: All right, that brings us to the end of our questions and I'm going to hand things over to Robert to wrap up. Okay, thank you Meredith. Thank you to all of the investors for joining the call and continuing to entrust your capital with us. We look forward to delivering during the second quarter, which is our holiday peak as long as the rest of his career. We're off the very good start. We're excited to be leveraging a stronger set of tools and capabilities to deliver great customer experiences stronger really than we've had in years.

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Robert Keane: We're also financially excited to continue on the path to grow our profit and cash flow very much in line with what we've been speaking about for the last year. And to continue as we do so nonetheless to invest in the development of new capabilities, new customer value propositions that will continue to build our intrinsic value per share.

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Unknown Executive: Thank you again for your time and have a great day.

Unknown Executive: Ladies and gentlemen, this concludes today's conference. Thank you for your participation.

Unknown Executive: You may now disconnect. Thank you.

Michael Fries: Michael Fries, Robert Keane, Sean Quinn Michael Fries, Robert Keane, Sean Quinn, Paul Roatta, Marlane Pereiro, Cimpress NV Michael Fries, Robert Keane, Sean Quinn, Paul Roatta, Marlane Pereiro Michael Fries, Robert Keane, Sean Quinn, Paul Roatta, Marlane Pereiro, Cimpress NV