Q4 2024 Cimpress PLC Earnings Call - Q&A

August 1, 2024

Welcome to the Cimpress Q4 FY 2024 Earnings Call. I will introduce Meredith Burns, Vice President of Investor Relations and Sustainability.

Meredith Burns: into this Meredith Burns, Vice President of Investor Relations and Sustainability.

Meredith Burns: Thank you, D. And thanks, everyone, for joining us. With us today are Robert Keane, founder, chairman and chief executive officer, and Sean Quinn, EVP and Chief Financial Officer. We appreciate the time that you've dedicated to understand our results, commentary, and outlook. This live Q&A session will last about 45 minutes and will answer both pre-submitted and live questions. You can submit questions via the questions and answers box at the bottom left of your webcast screen. Before we start, I'll note that in this session, we will make statements about the fever.

Unknown Executive: Thank you, Dee. And thank you, everyone, for joining us. Before we start, I'll note that in this session, we will make statements about the computer. However, 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. As we noted in the earnings documents, Cimpress had a strong finish to a strong year; in Q4, consolidated revenue grew 6% on both a reported basis and an organic constant currency basis.

Unknown Executive: Adjusted EBITDA grew $5 million year-over-year in Q4 to $119 million off of a tougher comp last year that had some one-time benefits. And we had year-over-year currency headwinds of a little more than $3 million, as expected. For the full year, adjusted EBP grew $129 million year over year to $469 million, which is 38% growth. And that growth is inclusive of year over year currency headwinds of $19 million, which is consistent with the expectation for currency impact that we said at the beginning of the year. During fiscal 2024, we repurchased 1.7 million shares for $157 million at an average price per share of $91.09.

Unknown Executive: That represents a 7% reduction in the shares outstanding at June 30 of 2023, and we're able to do that while substantially reducing leverage and increasing liquidity. Our multi-year outlook remains both positive and also unchanged. We expect to grow organic constant currency revenue at mid-single-digit rates, possibly a little higher. We expect to grow Adjusted EBITDA slightly faster than revenue, and we expect the multi-year conversion rate of Adjusted EBITDA to Adjusted Free Cash Flow to be approximately 45-50%, with fluctuations from year to year. This is a strong year. It's a year that has just ended.

Meredith Burns: Thank you, Dee, and thank you everyone for joining us. With us today are Robert Keane, Founder, Chairman and Chief Executive Officer, and Sean Quinn, EVP and Chief Financial Officer.

Speaker Change: We appreciate the time that you've dedicated to understand our results, commentary, and outlook. This live Q&A session will last about 45 minutes and will answer both pre-submitted and live questions.

Speaker Change: You can submit questions via the questions and answers box at the bottom left of your webcast screen.

Meredith Burns: Our actual results may differ materially from these statements due to risk factors that are outlined in detail in our SEC filing and the documents we published yesterday on our website. We also have published non-GAAP reconciliation for our financial results on our IR website, and we invite you to read them.

Speaker Change: Before we start, I'll note that in this session, we will make statements about the computer. 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.

Speaker Change: We also have published non-GAAP reconciliations for our financial results on our IR website, and we invite you to read them. And now I will turn things over to Sean.

Sean Quinn: And now I will turn things over to Sean. Great. Thanks a lot, Meredith, and thanks to everyone who's joined us today. Before we get into questions, I'm just going to highlight a few things from the two documents that we published yesterday. That first document was our earnings document that we normally publish, and then the second one is Robert's annual letter to investors. As we noted in the earnings documents, Cimpress had a strong finish to a strong year in Q4 for consolidated revenue groups, 6% on both a reported basis and organic currency basis. For the full year, revenue grew 7% on a reported basis, and a little over 5% on an organic currency basis.

Sean Quinn: Great. Thanks a lot, Meredith. And thanks to everyone who's joined us today. Before we get into questions, I'm just going to highlight a few things from the two documents that we published yesterday. That first document was our earnings document that we normally publish. And then the second one is Robert's annual letter to investors.

Robert Keene: As we noted in the earnings document, Cimpress had a strong finish to a strong year and Q4 consolidated revenue growth 6% on both a reported basis and organic constant currency basis.

Robert Keene: For the full year, revenue grew 7% on a reported basis and a little over 5% on an organic constant currency basis.

Sean Quinn: Adjusted EBITDA grew $5 million year over year in Q4 to $119 million, off of a tougher comp last year that had some one-time benefits, and we had year-over-year currency headwinds of a little more than $3 million, as expected. For the full year, adjusted EBITDA grew $129 million year over year to $469 million, which is 38% growth. And that growth is inclusive of year-over-year, currency headwinds of $19 million, which is consistent with the expectation for currency impact that we said at the beginning of the year. Our full year adjusted EBITDA margins were up over 300 basis points to 14.2% in fiscal 2024, and that was driven by a combination of revenue growth, gross margin expansion, and then also the cost reductions that we announced last March.

Robert Keene: Adjusted EBITDA grew $5 million year-over-year in Q4 to $119 million off of a tougher comp last year that had some one-time benefits and we had year-over-year currency headwinds of a little more than $3 million as expected.

Robert Keene: For the full year, adjusted EBITDA grew $129 million year-over-year to $469 million, which is 38% growth. And that growth is inclusive of year-over-year currency headwinds of $19 million, which is consistent with the expectation for currency impact that we set at the beginning of the year.

Robert Keene: Our full-year adjusted EBITDA margins were up over 300 basis points to 14.2% in fiscal 2024, and that was driven by a combination of revenue growth, gross margin expansion, and then also the cost reductions that we announced last March.

Sean Quinn: From a segment perspective, every segment accelerated revenue growth to quenchally this quarter, with the exception of national pen, where we made a choice to reduce advertising spend, and that impacted the revenue growth rate, but significantly improved profitability. In EBITDA, we continued to see growth in per customer value, which is a trend that we've been talking about for several years now, and we had our sixth consecutive quarter of growth in the number of customers we're serving as well. Those two things combined are having a positive impact, and that's been driving a lot of incremental; that's been driven by a lot of incremental improvements in the customer experience, but also a new product introduction that's supporting the attraction and retention of higher value customers across our geographic markets.

Robert Keene: From a segment perspective, every segment accelerated revenue growth sequentially this quarter, with the exception of National Pen, where we made a choice to reduce advertising spend, and that impacted the revenue growth rate, but significantly improved profitability.

Robert Keene: In VISTA, we continue to see growth in per-customer value, which is a trend that we've been talking about for several years now.

Robert Keene: And we had our sixth consecutive quarter of growth in the number of customers we're serving as well. Those two things combined are having a positive impact, and that's been driven by a lot of incremental improvements.

Robert Keene: In the customer experience, but also a new product introduction that's supporting the attraction and retention of higher value customers across our geographic markets.

Sean Quinn: Over the last two years, the value of this is new customer cohorts has been strong, and over time what we're seeing is that starting to have more impact on the health of repeat customer performance as well. It adjusted free cash flow with $170 million for Q4 and $261 million for the full year, a great result that benefited from our strong profit growth that I just went through, but also strong working capital inflows. Q4 did include proceeds from the sale of a building for just over $17 million that was something that would be referenced last quarter, but nonetheless, very strong cash flow result.

Robert Keene: Over the last two years, the value of VISTA's new customer cohorts has been strong, and over time, what we're seeing is that's starting to have more impact on the health of repeat customer performance as well.

Robert Keene: Adjusted free cash flow was $117 million for Q4 and $261 million for the full year, a great result that benefited from our strong profit growth that I just went through, but also strong working capital inflows.

Robert Keene: Q4 did include proceeds from the sale of a building for just over 17 million dollars. That was something that we referenced last quarter. But nonetheless, very strong cash flow result. It was our highest ever for a fiscal year and also for a fourth quarter.

Sean Quinn: It was our highest ever for a fiscal year and also for a fourth quarter. During fiscal 2024, we repurchased $1.7 million shares for $157 million at an average price per share of $91.9. That represents a 7% reduction to the shares outstanding at June 30 of 2023. And we're able to do that while substantially reducing leverage and increasing liquidity. Of that total fiscal 2024, repurchased $638,000 shares in Q4 for $56 million at an average price per share of $88.20. We finished the quarter with net leverage at June 30 of just under 3.0 times, currently 12 multibita as the fine bar credit agreement, and that's down from 3.9 times last year.

Robert Keene: During fiscal 2024, we repurchased 1.7 million shares for $157 million at an average price per share of $91.09. That represents a 7% reduction to the shares outstanding at June 30 of 2023.

Robert Keene: And we're able to do that while substantially reducing leverage and increasing liquidity.

Robert Keene: Of that total fiscal 2024 repurchase, we repurchased 638,000 shares in Q4 for $56 million at an average price per share of $88.20.

Robert Keene: We finished the quarter with net leverage at June 30th of just under 3.0 times trailing 12-month EBITDA as defined by our credit agreement, and that's down from 3.9 times last year.

Sean Quinn: Our multi-year outlook remains both positive and also unchanged. We expect to grow organic conste currency revenue at mid single digit rates, possibly a little higher. We expect to grow adjusted EBITDA slightly faster than revenue, and we expect a multi-year conversion rate of adjusted EBITDA to adjusted free cash flow to be approximately 45 to 50%, with fluctuations from year to year. In our early document, we also shared some housekeeping items that hopefully will be helpful for all of you as you seek to estimate our profitability and pre cash flow for FY25. I'm not going to go through all those details here, but I am happy to take any questions that you may have on that.

Robert Keene: Our multi-year outlook remains both positive and also unchanged. We expect to grow organic constant currency revenue at mid-single-digit rates, possibly a little higher.

Robert Keene: We expect to grow Adjusted EBITDA slightly faster than revenue and we expect the multi-year conversion rate of Adjusted EBITDA to Adjusted Free Cash Flow to be approximately 45-50% with fluctuations from year to year.

Robert Keene: In our earnings document, we also shared some housekeeping items that hopefully will be helpful for all of you as you seek to estimate our profitability and pre-cash flow for FY25.

Sean Quinn: And our plans for this next fiscal year of fiscal 2025 will be done all within the context of the leverage policy and commentary that we introduced last quarter, which also remains unchanged. This is a strong year, a year that just ended, and now all of our focus is on continuing to build on that progress in fiscal 2025 and the years ahead.

Robert Keene: I'm not going to go through all those details here, but I'm happy to take any questions that you may have on that. And our plans for this next fiscal year, fiscal 2025, will be done all within the context of the leverage policy and commentary that we introduced last quarter, which also remains unchanged.

Unknown Executive: And now all of our focus is on continuing to build on that progress in fiscal 2025 and the years ahead. After years of hard work through transformation, technology migrations, and increased investment, we feel we're poised to continue the progress that we had in fiscal 2024, leveraging our scale-based advantages that we're seeking to build upon, including in the area of production and supply chain, where we'll be investing more in CapEx in the year ahead to take advantage of opportunities there. So with that, Meredith, why don't we get into questions?

Robert Keene: This is a strong year. It's a year that just ended and now all of our focus is on continuing to build on that progress in fiscal 2025 and the years ahead.

Sean Quinn: I'd encourage everyone to read Robert's annual investor letter that was also published last night and gives an update on our strategic progress. After years of hard work through transformation, technology migrations, increased investment, we feel we're poised to continue the progress that we had in fiscal 2024. For leveraging our scale-based advantages that we're seeking to build upon, including in the area of production and supply chain, where we'll be investing more in cat bets in the year ahead to take advantage of opportunities there. So, with that, Meredith, why don't we get into the question again?

Robert Keene: I'd encourage everyone to read Robert's annual investor letter that was also published last night and gives an update on our strategic progress.

Robert Keene: After years of hard work through transformation, technology migrations, increased investment,

Speaker Change: We feel we're poised to continue the progress that we had in fiscal 2024, leveraging our scale-based advantages that we're seeking to build upon, including in the area of production and supply chain, where we'll be investing more in CapEx in the year ahead to take advantage of opportunities there.

Meredith Burns: Great. Thanks, Sean.

Sean Quinn: For everyone, as a reminder, you can submit questions during this podcast via the questions and answers box at the bottom left of the screen. We have received a couple of pre-submitted questions, and then I'll add the live ones as they come in. So our first question, I'm going to have Sean answer. Can you provide an Apple's breakdown of run rate EBITDA growth for Q4 FY24 versus Q4 FY23? I note from the release that currency lowered EBITDA by 3.1 million in FY24, one-time items benefited FY23 EBITDA by 3 million and that VISTA advertising was up by 130 basis points in FY24.

Robert Keene: So with that, Meredith, why don't we get into questions?

Meredith Burns: Great. Thanks, Sean.

Meredith Burns: For everyone, as a reminder, you can submit questions during this webcast via the questions and answers box at the bottom left of the screen. We have received a couple of pre-submitted questions, and then I'll add the live ones as they come in.

Speaker Change: So our first question, I'm going to have Sean answer. Can you provide an apple-to-apple breakdown of run rate EBITDA growth for Q4 FY24 versus Q4 FY23?

Sean Quinn: I note from the release that currency lowered EBITDA by 3.1 million in FY24, one-time items benefited FY23 EBITDA by 3 million, and that VISTA advertising was up by 130 basis points in FY24.

Sean Quinn: I also note that the quarter ended on a Friday last year and on a Sunday this year, which might adversely impact this year.

Speaker Change: I also note that the quarter ended on a Friday last year and on a Sunday this year, which might adversely impact this year. It would be helpful to understand how much runway EBITDA grew before FY24 normalizing for the unusual items.

Sean Quinn: It would be helpful to understand how much run rate EBITDA grew in FQ4 FY24, normalizing for the unusual items. Great.

Sean Quinn: Well, thanks for the question. It's a good one, and there's a lot of deceit on there. We always have some timing differences in shifts and things like time of holidays or how many days fall in a quarter. And that's an impact in Paris in the last year. So, to some extent, there's always some of this, but I would say this quarter in Q4, that impact was definitely more notable. And there are a few things that we call out in the release, as is that, and I mentioned in my opening remarks as well. Currency was a negative year-over-year impact, a year-over-year impact of just over $3 million on EBITM.

Speaker Change: Great. Well, thanks for the question. It's a good one. And yeah, there's a lot of deceit on there.

Speaker Change: We always have some timing differences and shifts.

Speaker Change: and things like timing of holidays or how many days fall in a quarter.

Speaker Change: [inaudible]

Speaker Change: Just to go through them. The first is that, and I mentioned in my opening remarks as well, currency was a negative year-over-year impact of just over $3 million on EBITDA. It was $19 million for the full year, $3 million for the quarter. So that's one.

Sean Quinn: It was $19 million for the full year; $3 million for the quarter. So that's one. Two is that, as we call it out in the release, there are some one-time benefits in VISTA last year that didn't repeat this year. And so that's a little over $3 million as well. So, between those two, you're at $6 million. And then, if you look at kind of the top half of our P&L, our consolidated gross profit grew $28 million a year-over-year in the quarter, which was just quite strong. Advertising spend was hired by $9 million a year-over-year. And that was mostly driven by VISTA.

Speaker Change: Two is that, as we called out in the release, there are some one-time benefits in VISTA last year that didn't repeat this year, and so that's a little over $3 million as well.

Unknown Executive: So between those two, you're at $6 million. And then, if you look at kind of the top half of our P&L, our consolidated gross profit grew $28 million year-over-year in the quarter, which was quite strong. The advertising spend was higher by $9 million year-over-year, and that was mostly driven by VISTA. And we talk about this sometimes in our advertising spend. It's normal also to see some fluctuations in intensity quarter-by-quarter, but that was accentuated in Q4 because last year in VISTA, we were doing pretty extensive testing where we went dark in certain channels and markets to test incrementality.

Speaker Change: So between those two, you're at $6 million. And then if you look at kind of the top half of our P&L, our consolidated gross profit grew $28 million a year in the quarter, which was quite strong. The advertising spend was higher by $9 million a year, and that was mostly driven by VISTA.

Sean Quinn: And, you know, we've talked about this sometimes, you know, in our advertising spend. It's normal also to see complexuations and intensity quarter by quarter. But that was accentuated in Q4 because last year in VISTA, we were doing pretty extensive testing where we were going dark in certain channels and markets to testing from mentality. And so that impacts the year-over-year comparison and is one of the reasons why advertising spend an absolute $1 a year-over-year is not as much as it is. We also had a creative shoot in VISTA that generates assets that we use for well more than a year.

Speaker Change: And, you know, we've talked, we talk about this sometimes, you know, in our advertising spend, it's normal also to see some fluctuations in intensity quarter by quarter.

Speaker Change: But that was accentuated in Q4 because last year in VISTA...

Speaker Change: We were doing pretty extensive testing where we were going dark in certain channels and markets to test incrementality. And so that impacts the year-over-year comparison and is one of the reasons why advertising spend in absolute dollars year-over-year is up as much as it is.

Unknown Executive: And so that impacts the year-over-year comparison and is one of the reasons why advertising spend in absolute dollars year-over-year is up as much as it is. Yep, so to your specific question, we do not see any reseller competitor, quote unquote, eating our lunch. This retailer distance or mediation in our upload and print space for many years, even as we've continued to grow our revenues in upload and print very nicely. We spoke about it again because it is continuing, but

Speaker Change: We also had a creative shoot in Vista that generates assets that we use for well more than a year but you know when we when we do that we expense all that up for that was about 1.4 million dollars so

Sean Quinn: But, you know, when we do that, we expense all that upfront. That is about $1.4 million. So, reported at EBITDA grew $5 million, but if you add up all those things, that's another about $16 million of year-over-year impact if you compare it back to Q4 last year. I think last year I would say advertising spend was lower than the normal run rate given the testing that we were doing.

Speaker Change: Reported EBITDA grew five million dollars but if you add up all those things

Speaker Change: That's another about $16 million of year-over-year impact if you compare it back to Q4 last year.

Speaker Change: I think last year I would say advertising spend was lower than the normal run rate given the testing that we were doing.

Sean Quinn: But in any case, I think it's very fair to say that the run rate EBITDA growth in Q4 was higher than the headline number that we reported.

Speaker Change: But in any case.

Speaker Change: I think it's very fair to say that the run rate EBDIG growth in Q4 was higher than the headline number that we reported.

Sean Quinn: Great, thank you, Sean.

Robert Keane: The next question I'm going to ask Robert to answer. Robert, can you talk a little bit more about the reseller challenges in print group? What gives us confidence that these are broad-based market challenges and not idiosyncratic to our businesses? That is, somebody is eating our lunch. Yep, so to your specific question, we do not see any reseller competitor, quote-unquote, eating our lunch. First of all, we do value our reseller customers, and we work hard to make them very competitive by serving them. But in the end, it is the end customer, the ultimate consumer of products, who chooses whatever channel is most convenient for them and most competitive.

Sean Quinn: Great. Thank you, Sean.

Speaker Change: The next question I'm going to ask Robert to answer. Robert, can you talk a little bit more about the reseller challenges in Print Group?

Robert Keene: What gives us confidence that these are broad-based market challenges and not idiosyncratic to our businesses? That is, somebody is eating our lunch.

Robert Keene: Yep, so to your specific question, we do not see any reseller competitor quote unquote eating our lunch. First of all, we do value our reseller customers and we work hard to make them very competitive by serving them.

Sean Quinn: But, in the end, it is the end customer, the ultimate consumer of products, who chooses whatever channel is most convenient for them and most competitive. And this shift that we are speaking about is part of a long-term

Robert Keane: And this shift that we are speaking about is part of a long-term, a different remediation as a shift towards direct-to-customer e-commerce models continue to grow. This retailer distanced her mediation in our upload and print space for many years, even as we've continued to grow our revenues in upload and print very nicely. We spoke about it again, because it is continuing. But, you know, if you step back, some of our upload and print businesses, including our largest ones, today have transitioned to the point where they serve mostly end customers. And so they're not exposed to these negative sides of the trend, but we do have a couple of businesses that historically and even currently primarily serve retailers, so their growth is more muted as a result.

Sean Quinn: Disintermediation as a shift towards direct-to-customer e-commerce models continue to grow. Now we've described...

Sean Quinn: This retailer disintermediation in our upload and print space for many years, even as we've continued to grow our revenues in upload and print very nicely, we spoke about it again because it is continuing, but.

Unknown Executive: You know, if you step back, some of our upload and print businesses, including our largest ones today, have transitioned to a point where they serve mostly end customers, and so they're not exposed to these negative sides of the trend, but we do have a couple of businesses that historically, and even currently, primarily serve retailers, so their growth is more muted as a result. Again, this isn't new.

Sean Quinn: You know if you step back some of our upload and print businesses including our largest ones

Sean Quinn: Today have transitioned to a point where they serve mostly end customers and so they're not exposed to these negative sides of the trend but we do have a couple of businesses that historically and even currently primarily serve retailers so their growth is more muted as a result.

Robert Keane: Again, this isn't new going back to why we spoke about it again this year, because this year our revenue growth in upload and print, which is driven by our traditional, serving our traditional products, has been coming from volume alone or primarily, whereas in the past, there is a mix shift towards newer products and placing improvements that we drove. This underlying reseller trend shows through our results in that environment. And now, if we step way back, we continue to think and believe that there's a long runway for growth in upload and print. Again, most of our businesses and our largest businesses are primarily serve end customers, not resellers.

Unknown Executive: Going back to why we spoke about it again this year, because this year our revenue grows in upload and print, which is driven by our traditional, serving our traditional product. We brought that up in signals out last night because, in summary, from a CapEx perspective, specifically, most of this is going into production operations, and it directly drives what we are really the best in the world at, which is the mass customization of print and print-related products. And we think the financial returns make a lot of sense. Some of these investments are really no brainers as they're going to pay off.

Sean Quinn: Again, this isn't new. Going back to why we spoke about it again this year, because this year our revenue growth in upload and print, which is driven by our traditional, certainly in our traditional products.

Sean Quinn: has been coming from volume alone or primarily whereas in the past there was a mixed shift towards newer products and pricing.

Sean Quinn: Improvements that we drove.

Sean Quinn: This underlying retailer trend shows through our results in that environment. And now if we step way back

Sean Quinn: We continue to think and believe that there's a long runway for growth in upload and print. Again, most of our businesses and our largest businesses in the segment primarily serve end customers, not resellers.

Robert Keane: Now, this shift is happening. I would say more volume going direct to end customers benefits in price overall. And finally, just say, repeating we do have an important business with our resellers. And we certainly are continuing to fortify our value proposition for them via things like new product introductions, quantity choices, which are right for their customers, faster delivery speed, and other things. Again, once again, as we do for all of our customers, whoever they are.

Sean Quinn: Now this shift is happening. I would say more volume going direct to end customers.

Sean Quinn: Benefits, Cimpress Overall, and finally I'd just say...

Sean Quinn: Repeating, we do have an important business with our resellers, and we certainly are continuing to fortify our value proposition for them.

Sean Quinn: [inaudible]

Robert Keane: Great. Thank you, Robert.

Robert Keane: Robert, I'm going to stick with you for the next question, which is about our CAPX, Ben. So what makes now the right time to accelerate those capital expenditures? We brought that up and signal that last night because, in summary, for the past two fiscal years and for the coming fiscal 25, we've been really focusing on operational execution. And this capital expenditure will really fortify the manufacturing and supply chain advantages, which are fundamental to that operational capability we have and a core part of operational execution.

Sean Quinn: Great, thank you, Robert. Robert, I'm gonna stick with you for the next question, which is about our CapEx spend. So what makes now the right time to accelerate those capital expenditures?

Speaker Change: We brought that up in Signals Out last night because in summary...

Speaker Change: For the past two fiscal years, and for the coming fiscal 25,

Speaker Change: We've been really focusing on operational execution and this capital expenditure will really fortify

Sean Quinn: the manufacturing and supply chain advantages, which are fundamental to that operational capability we have and a core part of operational execution. Now,

Robert Keane: Now, again, I give you some context that you certainly should read for more detail about what I'm about to say in my annual letter, which we published last night. But today, in summary, we are stronger financially and, importantly, operationally than we've been in many years because of the work we did to six years ago, the significant investment we did over those past years. And that has given us a solid foundation on which we are moving forward and building forward. And that solid foundation certainly is across many different aspects of our competitive advantage and our customer value proposition.

Speaker Change: Again, I give you some context to this. You certainly should read for more detail about what I'm about to say in my annual letter, which we published last night.

Speaker Change: But today, in summary, we are stronger financially and importantly operationally than we've been in many years because of the work we did to

Speaker Change: Six years ago, the significant investment we did over those past years and that has given us a solid foundation.

Speaker Change: on which we are moving forward and building forward. And that solid foundation certainly is across many different aspects of our competitive advantage and our customer value proposition. I wrote about those in our letter last night.

Robert Keane: I wrote about those in our letter last night. from a CAPEX perspective specifically. Most of this is going into production operations, and it directly drives what we are really the best of the world at, which is the mass customization of prank and print related products. And we think the financial returns make a lot of sense. Some of these investments are really no-brainers as they're going to drive much greater production efficiency with relatively quick payback given our high volumes. Other investments are for new product introduction that will allow us to expand how we serve our customers and attract new customers.

Speaker Change: From a CAPEX perspective specifically,

Speaker Change: Most of this is going into production operations, and it directly drives what we are really the best in the world at, which is the mass customization of print and print-related products. We think the financial returns make a lot of sense.

Speaker Change: Some of these investments are really no-brainers, as they're going to drive

Speaker Change: Much greater production efficiency with relatively quick payback given our high volumes.

Unknown Executive: Other investments are for new product introductions that will allow us to expand how we serve our customers and attract new customers. Others provide an improvement in quality or quality attributes that we can offer our customers, and many of them will do multiple of. Finally, let me just say, as we've communicated, when we increase CapEx or we increase any other aspect of our cash flow consumption, it is within the guardrail of the leveraged policy statements, which we said before, which we reiterated last night in our document.

Speaker Change: Other investments are for new product introductions that will allow us to expand how we serve our customers and attract new customers.

Robert Keane: Others provide an improvement in quality or quality attributes. So we can offer the customers, and many of them will do multiple of the things I just mentioned: you know, help health efficiency, they'll help NPI, and they'll help with quality attributes.

Speaker Change: others provide a

Speaker Change: Improvement in quality or quality attributes we can offer our customers and many of them will do multiple of the things I just mentioned. They'll help they'll help efficiency, they'll help NPI, and they'll help with quality attributes.

Robert Keane: So finally, I'd say we have been, and I spoke again, I spoke about this in my letter, but we are in a period that's quite a kind of in terms of the equipment market where there's been a lot of competition, a lot of innovation; some of that innovation co-developed with us and our suppliers. And across the supply chain for equipment, we see new equipment, which is very, very productive and very attractive.

Speaker Change: So

Speaker Change: Finally, I'd say we have been, and I spoke again I spoke about this in my letter, but we are in a period that's quite exciting in terms of the equipment market where there's been a lot of competition, a lot of innovation, some of that innovation co-developed with us and our suppliers.

Speaker Change: And across the supply chain for equipment, we see new equipment, which is very, very productive and very attractive.

Robert Keane: Finally, let's just say, as we've communicated, when we increase cap act, so we increase any other aspect of our cash flow consumption, it is within the guardrail of the leverage, leverage policy statements, which we said before, which we reiterated last night in our documents.

Speaker Change: Finally, let's just say, as we've communicated when we increase CapEx or we increase any other aspect of our cash flow consumption, it is within the guardrail of the leveraged policy statements, which we said before, which we reiterated last night in our documents.

Robert Keane: Great. Thank you so much, Robert.

Operator: All right.

Operator: I'm going to shift gears. We're going to talk about the debt side of things.

Speaker Change: Great. Thank you so much, Robert. All right. I'm going to shift gears. We're going to talk about

Sean Quinn: I'm going to pass the next couple of questions over to Sean. So Sean, any new thinking about refining and sending our 2026 bond? Yeah, the true answer is that nothing; there's nothing new there from what I said on last quarter's call with a similar question. Yeah, we haven't made any decisions on exactly when or how we'll refinance the bonds, but of course, you know, it's something that we are regularly thinking about. We still have a little under two years to maturity, and so, you know, we can be patient, but we're kind of getting into that window now where we'll be ready to act.

Speaker Change: We're going to talk about the debt side of things. I'm going to pass the next couple of questions over to Sean. So Sean, any new thinking about refinancing our 2026 bonds?

Sean Quinn: Yeah, the short short answer is that nothing there's nothing new there from what I said on last quarter's call. We had a similar question

Sean Quinn: We haven't made any decisions on exactly when or how we'll refinance the bonds. But of course, you know, it's something that we are regularly thinking about.

Speaker Change: We still have a little under two years to maturity, and so we can be patient, but we're kind of getting into that window now where we'll be ready to act.

Sean Quinn: And we'll be ready when it makes sense to do so. We're inviting a contact with our radio agencies so that they understand the financial progress that we've made, and we'll continue to do that. That's something we regularly do. And then, as I said last quarter as well, when we got this question, you know, we do like having both secure and unsecured debt in our capital structure. We think that diversification of our capital base is a good thing for a number of reasons. Keep some secured capacity, give us some optionality over time as well as our basic profitability growth.

Speaker Change: We'll be ready when it makes sense to do so. We're in regular contact with our rating agencies so that they understand the financial progress that we've made and we'll continue to do that. It's something we regularly do.

Speaker Change: And then as I said last quarter as well, when we got this question, you know, we do like having both secure and unsecured debt in our capital structure.

Speaker Change: We think that diversification of our capital base is a good thing for a number of reasons.

Speaker Change: [inaudible]

Sean Quinn: So no changing thinking there and, but, you know, we'll be ready to act when it makes sense to do so. And, you know, I think that's probably likely to be in this clear.

Sean Quinn: Great. Thanks.

Sean Quinn: Okay, so here, what are the plans for the small 46 million euro TLB tranche, just as an aside for folks who are listening. If you remember, during the quarter, we did reprise our turn loan B, and that actually involved fifth in the balance between US dollar and euro tranches of that. So well, the question is will it be repaid or will we hold it in until matured. Sure. Yeah, and it made that to do this in our repricing. We were able to get more benefit by shifting around the proportion of euro and US dollar in the term loan, the term loan B.

Speaker Change: Great, thanks.

Speaker Change: Okay, so the question here, what are the plans for the small 46 million euro TLB tranche?

Speaker Change: Just as an aside for folks who are listening, if you remember during the quarter we did reprice our term loan B and that actually involved a shift in the balance between U.S. dollar and euro tranches of that. So the question is, will it be repaid or will we hold it until maturity?

Speaker Change: Sure.

Speaker Change: Yeah, and it made sense to do this, in our repricing, we were able to get more benefit by shifting around the proportion of Euro and US dollar.

Sean Quinn: But yeah, we still have a plan to hold that until maturity unless we do something else with the term loan overall. Yeah, that can always change, but for now, the plan is to hold it.

Speaker Change: in the Term Loan B. But yeah, we still have a plan to hold that until maturity, unless we do something else with the term loan overall. Yeah, that can always change, but for now, plan is to hold it.

Sean Quinn: Okay, next question. For I think Sean, and then Robert, if you want to add anything after, please feel free. We'll start out Sean on this one for the 50% of organic investments in VISTA that are more subjective. So this person has read our annual letter, folks. If you haven't read it yet, this is something that's out of our annual letter. For the 50% of organic investments in VISTA that are more subjective, how do we increase the likelihood that these are in fact as attractive as we think. But differently, a few years ago, prior to the management changes at VISTA, we were making investments that, at the time, we thought were great, but in hindsight, we're value-destroying.

Speaker Change: Okay, next question. For, I think, Sean and then Robert, if you want to add anything after, please feel free. We'll start out with Sean on this one. For the 50% of organic investments in VISTA that are more subjective, so this person has read our annual letter, folks.

Speaker Change: If you haven't read it yet, this is something that's out of our annual letter. For the 50% of organic investments in VISTAs that are more subjective, how do we increase the likelihood that these are in fact as attractive as we think?

Speaker Change: Put differently, a few years ago, prior to the management changes at VISTA, we were making investments that at the time we thought were great, but in hindsight were value-destroying. What guardrails do we have in place today to avoid recommitting the sins of the past?

Sean Quinn: What guardrails do we have in place today to avoid recommitting the sins of the past? Yeah, great question. But yeah, let me try and provide a little context, especially for those who may not have read Robert's annual letter yet. I definitely recommend you read it when you have a moment. But as you see there, every year we give an estimate of our growth investments and also our steady-state pre-cash flow. And in our growth investments that we have, most of that is in VISTA. It's about three quarters of our growth investments in VISTA. And what we refer to in the letter is that there's about half of that investment in VISTA that we believe is easy to estimate because it's very discrete.

Speaker Change: Yeah.

Speaker Change: Great question. Let me try and provide a little context, especially for those who may not have read Robert's annual letter yet. I definitely recommend you read it when you have a moment. But as you see there, every year we give an estimate of our growth investments and also our steady state pre-cash flow.

Unknown Executive: Most of that is in VISTA; it's about three-quarters of our growth investment is in VISTA. And what we refer to in the letter is that there's about half of that investment in VISTA that we believe is easy to estimate because it's very discreet. So to give you a few examples, things like CapEx for new products or growth capacity, or there are portions of our advertising spend that are very clear and discreet. And so those are easy to estimate.

Speaker Change: and in our growth investments that we have.

Speaker Change: Most of that is in VISTA, it's about three quarters of our growth investment is in VISTA.

Speaker Change: And what we refer to in the letter is that there's about half of that investment in VISTA.

Sean Quinn: So I would give you two examples: things like catbacks for new products or growth capacity, or there are portions of our advertising spend that are very clear in discrete. And so those are easy to estimate. And then, in the other half of the VISTA growth investments, there's just more subjectivity or judgment. And we refer to that in the letter because there are investments like, for example, in product development where it's less discrete; you might have a product team that's working on a mix of maintenance topics and growth topics. And so the subjectivity that's referenced in the letter is with respect to the precision by which we estimate whether those investments or those costs are needed for steady-state or not.

Speaker Change: that we believe is easy to estimate because it's very discrete. So to give you a few examples, things like

Unknown Executive: And then the other half of the VISTA growth investment. More visibility has allowed us to be more data-driven in our decision-making. That's something we've talked about for the last few years at our investor days and other forums. There's less coordination cost.

Speaker Change: CapEx for new products or growth capacity or there's portions of our advertising spend that are very clear and discreet.

Speaker Change: And so those are easy to estimate. And then in the other half of the VISTA growth investments.

Speaker Change: There's just more subjectivity or judgment and we refer to that in the letter.

Speaker Change: Because they're investments like, for example, in product development where it's less discreet. You might have a product team that's working on a mix of maintenance topics and growth topics and so

Speaker Change: So the subjectivity that's referenced in the letter is with respect to the precision by which we estimate whether those investments or those costs are needed for steady state or not.

Sean Quinn: And so we make estimates of that, and we take that given the range of $30 million that we use between our low and high end of the range of estimated investments. We think that's more than sufficient to capture the range of judgment involved. So that's just some context. But I think the substance of the question is really around, you know, the past investments that we've made and how do we make sure that, particularly in VISTA, that we can improve the probability of good returns on those investments. So they highlight a few things in terms of what's changed since, you know, prior to 2019 when we made some significant changes in the VISTA business.

Speaker Change: And so we make estimates of that, and we think that given the range of $30 million that we use between our low and high end,

Speaker Change: of the range of estimated investments, we think that's more than sufficient to capture the range of judgment involved. So that's just some context.

Speaker Change: But I think, you know, the substance of the question is really around, you know, the past investments that we've made and how do we make sure that, particularly in VISTA, that we can improve the probability of good returns in those investments.

Speaker Change: They highlight a few things in terms of what's changed since prior to 2019 when we made some significant changes in the VISTA business. I think the first is that we have much better data and analytics that gives us

Sean Quinn: I think the first is that we have much better data and analytics that gives us just more visibility and has allowed us to be more data-driven in our decision making. That's something we've talked about for the last years in our investor days and other forms. Burns. The next one is that in many areas we've also changed the way that we're organized. There's less coordination costs, I think accountability is clear, teams are closer to customer problems we're trying to solve, and then the results that are being derived from the investments that we're making are the teams that are performing these things are clear as well.

Speaker Change: Just more visibility and has allowed us to be more data-driven in our decision-making. That's something we've talked about for the last years in our investor days and other forums.

Speaker Change: The next one is that in many areas, we've also changed the way that we're organized.

Unknown Executive: I think accountability is clear because teams are closer to the customer problems we're trying to solve. And then the results that are being derived from the investments that we're making; the teams that are performing these things are clearer as well. And that sounds like a small thing, you know, how we're organized, but it actually has a really big impact. And so I think it's just, you know, before it was simple, it was a lot more costly, a lot more engineering intensive to advance a unit of improvement and get feedback.

Speaker Change: There's less coordination cost. I think accountability is clearer.

Speaker Change: Teams are closer to customer problems we're trying to solve.

Speaker Change: And then the results that are being derived from the investments that we're making are the teams that are performing these things.

Sean Quinn: And that sounds like a small thing, you know, how we're organized, but it actually has a really big impact. And I think in a way that sort of analogous to some of the changes that we made back in 2019 in upload and print in terms of decentralizing further, improving accountability, improving clarity of results, and we've seen the benefit of that there as well. And I think this is analogous to that in many ways. We're doing a lot more experimentation, and the tools, the data, and all the practices that we're using there, they're just far better understood, they're far more embedded throughout the organization, and that what that means is that the unit of investment that's required to get customer feedback is just much smaller, and then we can iterate from there.

Speaker Change: are clear as well. And that sounds like a small thing, you know, how we're organized, but it actually has a really big impact.

Speaker Change: And I think, in a way, that's sort of analogous to some of the changes that we made back in 2019 in upload and print in terms of decentralizing further.

Speaker Change: improving accountability, improving clarity of results. And we've seen the benefit of that there as well. And I think this is analogous to that in many ways.

Speaker Change: We're doing a lot more experimentation, and the tools, the data, and all the practices that we're using there, they're just far better understood, they're far more embedded throughout the organization, and what that means is that the unit of investment that's required to get customer feedback.

Sean Quinn: So that's also quite a big change. And then the migration of technology that we went through for, you know, for multiple years, that provides far more flexibility and it's actually enabled us to do a lot of things that I've just outlined. And the pace of the incremental improvements that we're making is much higher. We see that in the impact of that in our new customer cohorts I refer to in the opening remarks and our overall performance as well. And so I think it's just, you know, before it was simply, it was a lot more costly, a lot more engineering intensive to advance a unit of improvement and get feedback, and that's improved greatly because of all these things.

Speaker Change: is just much smaller, and then we can iterate from there. So that's also quite a big change.

Speaker Change: and then the migration of technology that we went through for you know for multiple years that provides far more flexibility and has actually enabled us to do a lot of things that I've just outlined.

Speaker Change: And the pace of the incremental improvements that we're making is much higher. We see that in and the impact of that in our new customer cohorts I referred to in the opening remarks and our overall performance as well.

Speaker Change: And so, I think it's just, you know, it's...

Speaker Change: Before it was simply, it was a lot more costly, a lot more engineering intensive to advance a unit of improvement and get feedback. And that's improved greatly because of all these things.

Unknown Executive: And that's, that's improved greatly because of all these things. In terms of guardrails, I think there's, you know, there's a lot, there's a number of regular mechanisms that we have in place to review progress, and we've made pretty significant changes to the way that we do our planning and also how that maps back to our resource allocation across our product team. So I think that's important to note. And I think, you know, hopefully it was evident last year as well, we're not afraid to stop doing things if we don't see sufficient progress. And you know, that said, big shifts like we did last year in terms of cost reduction are quite painful, and so we want to avoid them. They're disruptive to progress.

Sean Quinn: In terms of guard rails, I think there's a lot; there's a number of regular mechanisms that we have in place to review progress, and we've made pretty significant changes to the way that we do our planning and also how that maps back to our resource allocation across our product team. So I think that's that's important to note. And I think, you know, hopefully it was evident last year as well; we're not afraid to stop doing the things if we don't see sufficient progress. And you know, that said big shifts like we did last year in terms of cost reduction are quite painful.

Speaker Change: In terms of guardrails, I think there's a number of regular mechanisms that we have in place to review progress.

Speaker Change: And we've made pretty significant changes to the way that we do our planning.

Speaker Change: And also how that maps back to our resource allocation across our product team. So I think that's, that's important to note. And I think, you know, hopefully it was evident last year as well. We're not afraid to stop doing things if we don't see sufficient progress. And, you know, that said,

Sean Quinn: And so we want to avoid those. They're disruptive to progress. And so, but yeah, after we took out a lot of cost last year and narrowed the focus of our investments, the bar, the bar there is going to remain very high for sure. And then I think lastly, you know, we've always tried to continue to learn and improve. And I think Robert's been very candid about, you know, where we've learned and improved when he does his recap in the annual letter, which we just published last night as well. We'll still make mistakes and get things wrong.

Speaker Change: Big shifts like we did last year in terms of cost reduction are quite painful. And so we want to avoid those they're disruptive to progress and so But yeah after we took out a lot of costs last year and narrowed the focus of our investments Yeah, the bar the bar there is going to remain very high for sure

Unknown Executive: And so, but yeah, after we took out a lot of costs last year and narrowed the focus of our investments, you know, the bar there is going to remain very high for sure. And then, I think, lastly, we've always tried to continue to learn and improve. And I think Robert's been very candid about, you know, where we've learned and improved when he does his recap in his annual letter, which we just published last night as well.

Robert Keene: And then, I think lastly, you know, we've always tried to continue to learn and improve. And I think Robert's been very candid about, you know, where we've learned and improved when he does his recap in his annual letter, which we just published last night as well.

Unknown Executive: We'll still make mistakes and get things wrong, but I think the nature of the investments that we're making now, I would say, relative to prior to 2019, is a bit nearer to the ones that you referred to in the question in terms of, you know, the ones that we thought were great and didn't fully play out. So hopefully, that provides some context, Robert. I'm not sure if there's anything you want to add. No, I agree with everything you said, but I wouldn't add anything. All right.

Sean Quinn: But I think the nature of the investments that we're making now, I would say relative to prior to 2019, is a bit near in versus the ones that you refer to in the question in terms of the ones that we thought were great and didn't fully play out. So hopefully that provides some context.

Robert Keene: We'll still make mistakes and get things wrong, but I think the nature of the investments that we're making now I would say relative to prior to 2019

Robert Keene: is a bit near in versus the ones that you referred to in the question in terms of the ones that we thought were great and didn't fully play out. So hopefully that provides some context. Robert, I'm not sure if there's anything you want to add. No, I agree with everything you said, but I wouldn't add anything.

Robert Keane: Robert, I'm not sure if there's anything you want to add.

Robert Keane: You know, I agree with everything you said, but I wouldn't add anything.

Robert Keane: Well, we are actually through all of the live questions at this point. And so I'm going to hand the call back over to Robert to wrap things up. Okay, thanks, Meredith. And thank you all as investors for joining the call and continuing to entrust your capital with us. As I said, a manual letter, Cimpress is financially strong, and that reflects the significant investment work that we've completed over the past six years. It's made us stronger operationally and technologically, and most importantly, stronger in terms of the value we deliver to our customers. And that strength really does well for our future and our ability to continue to drive increased customer value, and in doing so, grow our intrinsic value per share.

Robert Keene: All right.

Robert Keene: Well, we are actually through all the live questions at this point and so I'm going to hand the call back over to Robert to wrap things up.

Robert Keene: Okay, thanks Meredith. Thank you all as investors for joining the call and continuing to entrust your capital with us.

Unknown Executive: As I said in the manual letter, Cimpress is financially strong, and that reflects the significant investment work that we've completed over the past six years. It's made us stronger operationally and technologically, and, most importantly, stronger in terms of the value we deliver to our customers. And that strength really does bode well for our future and our ability to continue to drive increased customer value. [inaudible] With us today are Robert Keane, Founder, Chairman, and Chief Executive Officer, and Sean Quinn, EVP and Chief Financial Officer. You can submit questions via the questions and answers box at the bottom left of your webcast screen. Now, I will turn things over to Sean.

Robert Keene: As I said in my annual letter, Cimpress is financially strong and that reflects the significant investment and work that we've completed over the past six years.

Robert Keene: It's made us stronger operationally, and technologically, and most importantly, stronger in terms of the value we deliver to our customers. And that strength really does bode well for our future and our ability to continue to drive increased customer value.

Robert Keane: We'll certainly give more details on our strategic progress and what we're doing as a business in our upcoming virtual investor day, which will be held on September 10th of this year. And we hope you will join us for that as well. Thank you all.

Robert Keene: And in doing so, grow our intrinsic value per share.

Robert Keene: We'll certainly give more details on our strategic progress and what we're doing as a business in our upcoming Virtual Investor Day, which will be held on September 10th of this year, and we hope you will join us for that as well.

Operator: Ladies and gentlemen, that concludes today's call.

Robert Keene: Thank you all.

Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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what to say, I don't know what to say, I don't know what to say, I don't know what to say, I don't know what to say, I don't know what to say, I don't know what to say, I don't know what to say, I don't Welcome to the Cimpress Q4 FY2024 Ernie's call.

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I go into this Meredith Burns, Vice President of Investor Relations and Sustainability. Thank you, Dee. And thanks, everyone, for joining us. With us today, are Robert Keane, founder, chairman and chief executive officer, and Sean Quinn, EVP and chief financial officer. We appreciate the time that you've dedicated to understand our results, commentary, and outlook. This live Q and A session will last about 45 minutes and will answer both pre-submitted and live questions. You can submit questions via the questions and answers box at the bottom left of your webcast screen. Before we start, I'll note that in this session, we will make statements about the CMPR.

Speaker Change: Thank you, Dee. And thank you, everyone, for joining us. With us today are Robert Keane, Founder, Chairman and Chief Executive Officer, and Sean Quinn, EVP and Chief Financial Officer.

Our actual results made different materially from these statements due to risk factors that are outlined in detail in our SEC filing and the documents we published yesterday on our website. We also have published non-GAAP reconciliation for our financial results on our IR website, and we invite you to read them.

And now I will turn things over to Sean. Great. Thanks a lot, Meredith, and thanks to everyone who joined us today. Before we get into questions, I'm just going to highlight a few things from the two documents that we published yesterday. That first document was our earnings document that we normally publish, and then the second one is Robert's annual letter to investors. As we noted in the earnings documents, CMPRs had a strong finish to a strong year. In Q4, consolidated revenue groups 6% on both a reported basis and organic constant currency basis. For the full year, revenue grew 7% on a reported basis and a little over 5% on an organic constant currency basis.

Speaker Change: And now I will turn things over to Sean.

Adjusted EVP to a group 5 million dollars a year over a year in Q4 to 119 million dollars off of a tougher complex year that had some one-time benefits. And we had year-over-year currency headwinds of a little more than $3 million, as expected. For the full year, adjusted EVP grew $129 million a year over a year to $469 million, which is 38% growth. And that growth is inclusive of year-over-year currency headwinds of 19 million dollars, which is consistent with the expectation for currency impact that we said at the beginning of the year. Our full year adjusted EVP to margins were up over 300 basis points to 14.2% in fiscal 2024.

And that was driven by a combination of revenue growth, gross margin expansion, and then also the cost reductions that we announced last March. From a segment perspective, every segment accelerated revenue growth sequentially this quarter, with the exception of National Pen, where we made a choice to reduce advertising spend, and that impacted the revenue growth rate, but significantly improved profitability. In VISTA, we continue to see growth in per-customer value, which is a trend that we've been talking about for several years now. And we had our sixth consecutive quarter of growth in the number of customers we're serving as well.

Those two things combined are having a positive impact. And that's been driving a lot of incremental—that's been driven by a lot of incremental improvements in the customer experience, but also a new product introduction that's supporting the attraction and retention of higher value customers across our geographic markets. Over the last two years, the value of VISTA's new customer cohort has been strong. And over time, what we're seeing is that's starting to have more impact on the health of repeat customer performance as well. It adjusted free cashflow with $117 million for Q4 and $261 million for the full year, a great result that benefited from our strong profit growth that I just went through, but also strong working capital inflows.

Q4 did include proceeds from the sale of a building for just over $17 million that was something that would be referenced last quarter, but nonetheless very strong cashflow result. It was our highest ever for a fiscal year and also for a fourth quarter. During fiscal 2024, we repurchased $1.7 million shares for $157 million at an average price per share of $91.9. That represents a 7% reduction to the shares outstanding at June 30 of 2023, and we're able to do that while substantially reducing leverage and increasing liquidity. Of that total fiscal 2024 repurchase, we repurchased 638,000 shares in Q4 for $56 million at an average price per share of $88.20.

We finished the quarter with net leverage at June 30 of just under 3.0 times, currently 12 multibita at the five bar credit agreement, and that's down from 3.9 times last year. Our multi-year outlook remains both positive and also unchanged. We expect to grow organic currency revenue at mid single-digit rates, possibly a little higher. We expect to grow adjusted EBITDA slightly faster than revenue, and we expect a multi-year conversion rate of adjusted EBITDA to adjusted free cash flow to be approximately 45 to 50%, with fluctuations from year to year. In our earnings document, we also shared some housekeeping items that hopefully will be helpful for all of you as you seek to estimate our profitability and pre cashflow for FY25.

I'm not going to go through all those details here, but I'm happy to take any questions that you may have on that, and our plans for this next fiscal year, fiscal 2025, will be done all within the context of the leverage policy and commentary that we introduced last quarter, which also remains unchanged. This is a strong year; it's a year that just ended, and now all of our focus is on continuing to build on that progress in fiscal 2025 in the years ahead.

I'd encourage everyone to read Robert's annual investor letter that was also published last night and gives an update on our strategic progress. After years of hard work through transformation, technology migrations, increased investment, we feel we're poised to continue the progress that we had in fiscal 2024, leveraging our scale-based advantages that we're seeking to build upon, including in the area of production and supply chain, where we'll be investing more in cat bets in the year ahead to take advantage of opportunities there.

So, with that, Meredith, why don't we get into the question again? Great. Thanks, Sean. For everyone, as a reminder, you can submit questions during this podcast via the questions and answers box at the bottom of the screen. We have received a couple of pre-submitted questions, and then I'll add the live ones as they come in. So our first question I'm going to have Sean answer. Can you provide an Apple's breakdown of run rate EBITDA growth for Q4 FY24 versus Q4 FY23? I note from the release that currency lowered EBITDA by 3.1 million in FY24, one-time items benefited FY23 EBITDA by 3 million and that VISTA advertising was up by 130 basis points in FY24.

I also note that the quarter ended on a Friday last year and on a Sunday this year, which might adversely impact this year. It would be helpful to understand how much run rate EBITDA grew in FY24, normalizing for the unusual items. Great. Well, thanks for the question. It's a good one, and there's a lot of things on there. We always have some timing differences in shifts in things like time of holidays or how many days fall in a quarter, and that's an impact comparisons to last year. So, to some extent, yeah, there's always some of this, but I would say this quarter in Q4, that impact was definitely more notable.

And there are a few things that we called out in the release, as you know, in the question just to go through them. The first is that, and I mentioned in my opening remarks as well, currency was a negative year-over-year impact, a year-over-year impact of just over $3 million on EBITEM. It was $19 million for the full year; $3 million for the quarter. So that's one. Two is that, as we called out in the release, there are some one-time benefits in VISTA last year that didn't repeat this year, and so that's a little over $3 million as well.

So, between those two, you're at $6 million, and then if you look at kind of the top half of our P&L, our consolidated gross profit grew $28 million a year-over-year in the quarter, which was quite strong. The advertising spend was hired by $9 million a year-over-year, and that was mostly driven by VISTA. And, you know, we've talked about this sometimes. You know, in our advertising spend, it's normal also to see some fluctuations in intensity quarter by quarter, but that was accentuated in Q4 because last year in VISTA we were doing pretty extensive testing where we were going dark in certain channels and markets to testing from mentality, and so that impacts the year-over-year comparison and is one of the reasons why advertising spend in absolute dollars year-over-year is not as much as it is.

We also had a creative shoot in VISTA that generates assets that we use for well more than a year, but, you know, when we do that, we expense all that upfront. That was about $1.4 million. So, reported at EBITDA grew $5 million, but if you add up all those things, that's another about $15 million a year-over-year impact if you compare it back to Q4 last year. I think last year I would say advertising spend was lower than the normal run rate given the testing that we were doing, but in any case, I think it's very fair to say that the run rate EBITDA growth in Q4 was higher than the headline number that we reported.

Great, thank you, Sean.

The next question I am going to ask Robert to answer. Robert, can you talk a little bit more about the reseller challenges in print group? What gives us confidence that these are broad-based market challenges and not idiosyncratic to our businesses? That is, somebody is eating our lunch. Yep, so for your specific question, we do not see any reseller competitor quote-unquote eating our lunch. First of all, we do value our reseller customers, and we work hard to make them very competitive by serving them. But in the end, it is the end customer, the ultimate consumer of our products, who chooses whatever channel is most convenient for them and most competitive.

And this shift that we are speaking about is part of a long-term, a disintermediation as a shift towards direct to e-commerce models continue to grow. Now, we describe this retailer distant remediation in our upload and print space for many years, even as we've continued to grow our revenues in upload and print very nicely. We spoke about it again because it is continuing, but if you step back, some of our upload and print businesses, including our largest ones, today have transitioned to a point where they serve mostly end customers. And so they're not exposed to these negative sides of the trend, but we do have a couple of businesses that historically and even currently primarily serve retailers, so their growth is more muted as a result.

Again, this isn't new, going back to why we spoke about it again this year because this year our revenue grows in upload and print, which is driven by our traditional sort of our traditional products has been coming from volume alone or primarily wears in the past. There is a mix shift towards newer products and pricing improvements that we drove. This underlying retailer trend shows through our results in that environment, and now as we step way back, we continue to think and believe that there's a long runway for growth in upload and print. Again, most of our businesses and our largest businesses in the segment primarily serve end customers, not resellers.

Now, this shift is happening; I would say more volume going direct to end customers benefits in price overall. And finally, just say repeating we do have an important business with our resellers, and we certainly are continuing to fortify our value proposition for them via things like new product introductions, quantity choices, which are right for their customers, faster delivery speed, and other things. Again, once again, as we do for all of our customers, whoever they are. Great, thank you, Robert.

Robert, I'm going to stick with you for the next question, which is about our cap expense. So what makes now the right time to accelerate those capital expenditures? Right, we brought that up and singled out last night because, in summary, for the past two fiscal years and for the coming fiscal 25, we've been really focusing on operational execution, and this capital expenditure will really fortify the manufacturing and supply chain advantages, which are fundamental to that operational capability. We have a core part of operational execution. Now, again, I give you some context that you certainly should read for more detail about what I'm about to say in my annual letter, which we published last night.

But today, in summary, we are stronger financially and, importantly, operationally than we've been in many years because of what the work we did two to six years ago, the significant investment we did over those past years, and that has given us a solid foundation on which we are moving forward and building forward. And that solid foundation certainly is across many different aspects of our competitive advantage and our customer value proposition. I wrote about those in our letter last night. from my CAPEX perspective specifically, most of this is going into production operations and it directly drives what we are really the best of the world at, which is the mass customization of prank and print related products.

We think the financial returns make a lot of sense. Other investments are for new product introductions that will allow us to expand how we serve our customers and attract new customers. Others provide an improvement in quality or quality attributes that we can offer in our customers, and many of them will do multiple of the things I just mentioned. They'll help the efficiency, they'll help NPI, and they'll help with quality attributes. So finally, I'd say we have been, and I spoke again, I spoke about this in my letter, but we are in a period that's quite exciting in terms of the equipment market where there's been a lot of competition, a lot of innovation, some of that innovation co-developed with us and our suppliers.

And across the supply chain for equipment, we see new equipment, which is very, very productive and very attractive. Finally, let's just say, as we've communicated, and when we increase CAPEX or we increase any other aspect of our cash flow consumption, it is within the guardrail of the leverage, leverage policy statements, which we said before, which we reiterated last night in our documents. Great. Thank you so much, Robert.

All right.

I'm going to shift gears. We're going to talk about the debt guide of things. I'm going to pass the next couple of questions over to Sean. So Sean, any new thinking about refining and seeing our 2026 bond? Sure. There's nothing new there from what I said on last quarter's call. We have a similar question. We haven't made any decisions on exactly when or how we'll refinance the bonds, but of course, you know, it's something that we are regularly thinking about. We still have a little under two years to maturity, and so we can be patient, but we're kind of getting into that window now, where we'll be ready to act.

And we'll be ready when it makes sense to do so. We're inviting a contact with our radio agencies so that they understand the financial progress that we've made. And we'll continue to do that. That's something we regularly do. And then, as I said last quarter, as well, when we got this question, you know, we do like having both secure and unsecured debt in our capital structure. We think that diversification of our capital base is a good thing for a number of reasons: to keep some secured capacity, gives us some optionality over time, as well as our base of profitability grows.

So no change in thinking there, but we'll be ready to act when it makes sense to do so. And I think that's probably likely to be in this clear. Great.

Thanks. Okay. So here, what are the plans for the small 46 million euro TLB tranche, just as an aside for folks who are listening. If you remember, during the quarter, we did reprice our turn loan B, and that actually involved fifth in the balance between US dollar and euro tranches of that. So well, the question is will it be repaid or will we hold it in until matured? Sure. Yeah, and it made sense to do this in our repraising. We were able to get more benefit by shifting around the proportion of Euro and US dollar in the term loan B, but yeah, we still have a plan to hold that until maturity unless we do something else with the term loan overall.

Yeah, that can always change, but for now, the plan is to hold it. Okay, next question. For I think Sean, and then Robert, if you want to add anything after, please feel free. We'll start out Sean on this one for the 50% of organic investments in VISTA that are more subjective. So this person has read our annual letter, folks. If you haven't read it yet, this is something that's out of our annual letter. For the 50% of organic investments in VISTA that are more subjective, how do we increase the likelihood that these are, in fact, as attractive as we think?

But differently, a few years ago, prior to the management changes at VISTA, we were making investments that, at the time, we thought were great, but in hindsight, we're value destroying. What guardrails do we have in place today to avoid recommitting the sins of the past? Yeah, great question. But yeah, let me try and provide a little context, especially for those who may not have read Robert's annual letter yet. I definitely recommend you read it when you have a moment. But as you see there, every year we give an estimate of our growth investments that also are steady state pre-cashable.

And in our growth investments that we have, most of that is in VISTA; that's about three quarters of our growth investment is in VISTA. And what we refer to in the letter is that there's about half of that investment in VISTA that we believe is easy to estimate because it's very discrete. So to give you two examples, things like cat bats for new products or growth capacity, or there's portions of our advertising spend that are very clear in discrete. And so those are easy to estimate. And then, in the other half of the VISTA growth investments, there's just more subjectivity or judgment.

And we refer to that in the letter because their investments, like, for example, in product development, where it's less discrete, you might have a product team that's working on a mix of maintenance topics and growth topics. So the subjectivity that's referenced in the letter is with respect to the precision by which we estimate whether those investments or those costs are needed for steady state or not. And so we make estimates of that, and we take that given the range of $30 million that we use between our low and high end of the range of estimated investments.

We think that's more than sufficient to capture the range of judgment involved. So that's just some context. But I think the substance of the question is really around the past investments that we've made and how do we make sure that, particularly in VISTA, that we can improve the probability of good returns on those investments. And so they highlight a few things in terms of what's changed since prior to 2019 when we made some significant changes in the VISTA business. I think the first is that we have much better data and analytics that gives us just more visibility and has allowed us to be more data-driven in our decision making.

And that's something we've talked about for the last years in our investor days and other forms. Burns. The next one is that in many areas, we've also changed the way that we're organized. There's less coordination costs, I think accountability is clearer, teams are closer to customer problems we're trying to solve, and then the results that are being derived from the investments that we're making are the teams that are performing these things are clearer as well. And that sounds like a small thing, you know, how we're organized, but it actually has a really big impact. And I think in a way that sort of analogous to some of the changes that we made back in 2019 in upload and print in terms of decentralizing further, improving accountability, improving clarity of results, and we've seen the benefit of that there as well.

And I think this is analogous to that in many ways. We're doing a lot more experimentation, and the tools, the data, and all the practices that we're using there, they're just far better understood, they're far more embedded throughout the organization, and that what that means is that the unit of investment that's required to get customer feedback is just much smaller, and then we can iterate from there. So that's also quite a big change. And then the migration of technology that we went through for, you know, for multiple years, that provides far more flexibility and it's actually enabled us to do a lot of the things that just outlined.

And the pace of the incremental improvements that we're making is much higher. We see that in the impact of that in our new customer cohorts I referred to in the opening remarks and our overall performance as well. And so I think it's just, you know, before it was simply, it was a lot more costly, a lot more engineering intensive to advance a unit of improvement and get feedback, and that's improved greatly because of all these things. In terms of guardrails, I think there's a number of regular mechanisms that we have in place to review progress, and we've made pretty significant changes to the way that we do our planning, and also how that maps back to our resource allocation across our product team.

So I think that's that's important to note. And I think, you know, hopefully it was evident last year as well. We're not afraid to stop doing the things if we don't see sufficient progress. And you know, that said, big shifts like we did last year, in terms of cost reduction, are quite painful, and so we want to avoid those. They're disruptive to progress. And so, but yeah, after we took out a lot of costs last year and narrowed the focus of our investments, the bar, the bar there is going to remain very high for sure.

And then I think lastly, you know, we've always tried to continue to learn and improve. And I think Robert's been very candid about, you know, where we've learned and improved when he does his recap in the annual letter, which we just published last as well. We'll still make mistakes and get things wrong, but I think the nature of the investments that we're making now, I would say relative to prior to 2019, is a bit near in versus the ones that you referred to in the question in terms of the ones that we thought were great and didn't fully play out.

So hopefully that provides some context. Robert, I'm not sure if there's anything you want to add. No, I agree with everything you said, but I wouldn't add anything.

Well, we are actually through all of the live questions at this point.

And so I'm going to hand the call back over to Robert to wrap things up. Okay, thanks, Meredith. And thank you all as investors for joining the call and continuing to entrust your capital with us. As I said, a manual letter, Cimpress is financially strong, and that reflects the significant investment work that we've completed over the past six years. It's made as strong as operationally and technologically, and most importantly, stronger in terms of the value we deliver to our customers. And that strength really does load well for our future and our ability to continue to drive increased customer value, and in doing so, grow our intrinsic value per share.

We'll certainly give more details on our strategic progress and what we're doing as a business in our upcoming virtual investment, which will be held on September 10th of this year. And we hope you will join us for that as well. Thank you all.

Q4 2024 Cimpress PLC Earnings Call - Q&A

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