Q1 2025 Cimpress PLC Earnings Call
and the
The End
Speaker Change: Welcome to the Simpress Q1, fiscal year 2025 earnings call. I will introduce Meredith Burns by President of Mr. Relations, and Sustainability.
Meredith Burns: Thank you Michelle and thank you everyone for joining us and Happy Halloween to those two celebrate. With us today our Robert King, our founder, chairman and chief executive officer, and Sean Quinn, EVP and chief financial officer.
Meredith Burns: 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 live questions and answer stocks at the bottom left of the screen.
Meredith Burns: 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.
Meredith Burns: We have also published non-gap reconciliation for our financial results on our website as well. We invite you to read them and now I will turn things over to Robert.
Robert King: Thank you, Meredith. Thank you to all of you for joining us. Sean in the moment it's going to speak about our first quarter financial results, but first let me share some personal insights.
Robert King: and how across the press are talented and are engaged. Team members are driving.
Robert King: Significant customer value and efficiency.
Robert King: Through Focus Execution and this call in particular is a great time to do so because
Robert King: I personally have just spent a month about tover visiting over 20 different simple dislocations across North America and Europe. And the observation that I want to share with you today are coming really straight from the front lines.
Robert King: So first of all, we are continually improving our customer experience. For example, in the past week I sat side-by-side with team members from product development, with frontline designers.
Robert King: with Servic team members who also would be improvements they're driving to things like file revision and design creation and file upload processes.
Robert King: and even more specific examples in one.
Robert King: Sit Down session. I was with one of our designers in our team in Tunisia.
Robert King: and he was designing beautiful product labels for a high value customer.
Robert King: in our uploading prank group, who wins.
Robert King: Extending her line of aroma therapy products, and these are capabilities we simply didn't have a few years ago.
Robert King: Second, we are driving efficiency and proven quality, increasing speed of delivery across the valley chain and as part of that month of travel.
Robert King: I was about a dozen of our production facilities and no matter what size of facility or what product focus, team members consistently demonstrated the combination of continuous improvement and capital investment, which together are reducing costs and improving quality.
Robert King: Third, we are growing lifetime customer value.
Robert King: and the lifetime value of our customers as well as our revenues through more complex products and supporting.
Robert King: and those complex products with customer experience improvement. For example,
Robert King: Hi, this is Edard team in Europe, who is responsible for flexible packaging and our US team who's leaving our drive into corrugated packaging. Both of these are small, currently, but they potentially large product categories in which we are currently growing at well over 25% a year.
Robert King: and the average lifetime value of these customers is many times our typical or our average customer. And almost all of these packaging customers are small and medium sized businesses who form the core of the business.
Robert King: Fourth, I really saw firsthand how VISTA has continued building momentum based on the foundations we've been investing in for five years or more and that includes a modern flexible technology and data infrastructure.
Robert King: the strengthening of VISTA's product development capabilities and repositioning of VISTA print away from the previous discount driven brand image. And the results are really an improved customer experience that attracts and retained high-value customers.
Robert King: During my travel, team members were part of the VISTA teams who were driving growth and packaging and logo apparel and large format walked me through production floor operations where I could personally touch and feel these gorgeous quality products.
Robert King: of countless real-life customers in these important growth categories.
Robert King: and last but not least across all my visits I saw how our select few shares through strategic capabilities are really deeply integrated into the ways of working. They're helping us drive customer value and competitive advantage.
Robert King: as one of two examples I'll describe.
Robert King: had a equipment.
Robert King: Supplier with a...
Robert King: Capital Equipment Specialist from our Global Procurement Team, can multiple leaders from two different reporting segments.
Robert King: and we were at a half day deep dive at the engineering facility of an innovative
Robert King: and I'm a equipment supplier with whom we are working to develop even more innovation applications for a new product category we're working on.
Robert King: and likewise.
Robert King: in all my business difficulties. I saw how businesses are leveraging MCPs functionality for artwork, for e-commerce, for fulfillment operations, for cross-film, across-simples fulfillment and for data.
Speaker Change: So three months ago, Siemprez completed our record-bathed fiscal year in terms of revenue and profitability and looking forward.
Speaker Change: The type of focus execution that I'm describing today, which I personally saw over the last month, and our clearing consistent strategy makes us confident that in fiscal 25, we're going to, again, set new records for both revenue and profits.
Speaker Change: More importantly, the type of frontline talent and the initiatives that I've had the pleasure of seeing reassure me that for many years to come, we can relentlessly improve the value we deliver to our customers and strengthen our print and ask customization capabilities and in doing so.
Speaker Change: We expect to continue to earn market shareings in this very large, fragmented landscape. We're a traditional competitor still account for the majority of the market.
Speaker Change: with that, Sean let me turn you over to you to talk about our first quarter financial results.
Sean Quinn: Yeah, thanks a lot Robert. Thanks for that summary. So this start and as we noted in the earnings document that we released after the market yesterday, suppressed the liver solved results for the quarter. It's all in a revenue group 6% on both a reported basis and an organic constant currency basis.
Sean Quinn: The Justice EBITDA declined slightly over year and she won to $88 million, inclusive of current the headwinds of just under a million dollars.
Sean Quinn: The obvious question that we would expect from investors is with the context of our multi-year commentary that we've provided. Why don't we see the revenue growth that I just mentioned, translate into increased profitability specifically, and increase the Justin Ebitah in Q1 versus last year.
Sean Quinn: There's no change to our multi-year guidance commentary and we remain confident in our ability to deliver against the growth and revenue, just to do something for Casuala that we've outlined. But let me just walk through the Q1 results with that question in mind.
Sean Quinn: First, if you look at the results at a consolidated level, our gross margins and our advertising answer percentage of revenue reflect your rear. So the growth in the contribution profit dollars that we had in Q1 was consumed by increases in operating expenses.
Sean Quinn: and Keywon is typically our lowest volume revenue quarter, so op-ax increase is like annual merit increase that we have in quitting those for our central teams, our less absorbed by revenue in our first quarter than they are during other quarters.
Sean Quinn: From a segment perspective, segment EBITDA increased in Upload and Print, it increased the national pen and also in our other businesses segment with higher growth margins across the board and also in some cases lower advertising as a percentage of revenue.
Sean Quinn: In VISTA Organic Consequence, you've revenue growth was strong, and 8% and from a category perspective, what we saw in Q1 was very consistent with what we shared at our September and yesterday in terms of where we're seeing strength and also where we see headlands.
Sean Quinn: Mr. Hadstra on strong quarter in Europe across the board. In North America, revenue growth is solid there, but this is where we have a slightly cleaner revenue from business cards that has a bit more impact on product myths and therefore also a bit more impact on gross margin.
Sean Quinn: We had also planned a Q1 to have your advertising spend, not only actually Q1 but also for the full first half of the year. And you see that this quarter, and that's not any material shift of mode in terms of our advertising approach, but it does impact the year of your results for Q1.
Sean Quinn: So if you take a step back for a VISTA.
Sean Quinn: The organic consequences of currency revenue growth of 8% that we reported, translated to 6% for us profit growth.
Sean Quinn: But advertising spend grew about 12% year over year and that's really the main impact of the flow through him Q1 We also had a $1.8 million benefit in last year's VISTA results and that did repeat this year
Sean Quinn: Panning back out to our consolidated results from a free cash flow perspective, free cash flow is lower year every year.
Sean Quinn: The biggest driver of this was higher outflows from changes in working capital. You'll recall that last year, the working capital impact of supply changes, disrupts from we're still normalizing until last year we had favorable inventory trends from a working capital perspective.
Sean Quinn: The other significant driver.
Sean Quinn: of the three cash flow decrease year over year was cash interest payments that increased $10.6 million versus the year ago period. That was due to our senior notes refinancing, which brought forward the timing of our typical semi-annual interest payments on our prior senior notes that were due in 2026 that have now been redeemed.
Sean Quinn: From a balance sheet perspective, as just mentioned during the quarter we successfully completed a high yield notes offering for new eight year notes that replace our prior 2026 notes and we can currently extend it to maturity and amended the interest rate.
Sean Quinn: of our existing Reviving Credit Facility.
Sean Quinn: These steps combine with the substantial reduction in that leverage since the peak in December of 2022 have significantly strengthened our balance sheet and also our debimatory profile.
Sean Quinn: Very importantly, we've been able to make these Bouchy to Proomance and maintain strong liquidity while also allocating capital to significant organic investments that we've outlined in more detail in our annual letter that was published back in July.
Sean Quinn: And with the last three quarters, we've also allocated $160 million to the repurchase of about 8% of our shares, and what we believe to be very attractive multiples of earnings cash flow and steady state precaution.
Sean Quinn: We also allocated another $9 million to repurchase in the month of October
Sean Quinn: and we plan to continue to do so at prices remain attractive, but all of that will still be subject to the leverage commentary that we previously outlined, which has a reminder it would be to end this fiscal year with net leverage at or below approximately 2.75 times, our choice to advance the eBethet to find our credit agreement.
Sean Quinn: and we'll report to seeing Sheriffs.
Sean Quinn: Finally, we're of course now in our second quarter of the fiscal year and that includes the holiday peak season. We had a pre-submit a question around our expectations for the upcoming season. We feel very good about our preparations and plans as that starts to ramp up.
Sean Quinn: also trends in VISTA's Consumer Product category.
Sean Quinn: Having good with growth in each of the last five quarters, also a Q1 that we just reported here was strong. And that's really even benefiting from the focus of our consumer team, from new product interdoctions, but also the overall experience improvements that we've talked about over the last few years.
Sean Quinn: That said, compared to last year we do have five fewer selling days between American Thanksgiving and Christmas and we also have the U.S. election. So we plan accordingly for those to the extent that we can, but those could dampen overall demand and you're over your girl.
Speaker Change: with that I'll turn it back to you Meredith for Q&A.
Meredith Burns: Wonderful, thank you Sean. As a reminder, you can submit questions during the 12 cast-feed questions and answers box at the bottom left of the screen. Now we received a number of pre-cimated questions and we also look forward to taking your live questions as well.
Meredith Burns: So let's jump in with our first question that was presented. Robert this question is going to be for you. What makes you confident enough to make such high levels of growth investments and sharing purchases?
Robert King: Thanks for the question. Let me take those two subjects in terms starting with growth investment and I'll come to share purchases.
Robert King: So we're confident in continuing at a similar level of growth investment as we had in fiscal 23 and fiscal 24 because of the strong performance we've demonstrated in terms of customer value improvements, competitive advantage enhancements and financial results.
Robert King: Our strong opportunity for the years ahead of us would not exist in the absence of those consistent investments in technology, talent, new product introductions, design, and enablement.
Robert King: Next Generation Manufacturing Excellence.
Robert King: and Advertising. They're collectively underpin our customer value improvement and our competitive advantage in enhancement. So, for fiscal 24, we reported...
Robert King: and that those growth investments from a cash flow perspective were about $146 million at the midpoint estimate. And that as you know in your question we expected to continue with a growth investment level similar to that in this fiscal 25.
Speaker Change: Now, as to my comment about strong financial results, let me be a little more explicit about what I mean. In my letter to shareholders from July, I spoke about our multi-year and multi-decade growth in terms of revenue and profitability.
Speaker Change: The focusing on where that trend has brought us to, in the last fiscal year, we generated about $10 in adjusted pre-cattable per diluted chair.
Speaker Change: Now, even after your just set for asset sales and some unusually favorable, working in capital.
Speaker Change: the cash flow for share was still about $8, and all of these cash flow numbers are after the roughly $146 million in growth investments.
Speaker Change: So that free cast flow per share leads to the second subject of your question, would you share repartuses?
Speaker Change: Chair repurchases make even more sense when our especially makes sense, when our share price is trading today and where it is relative to that free cash flow, for sure after growth investment.
Speaker Change: Now, for the reasons we talk about very regularly, for example, in our investor day presentations, we think those $146 million of growth investment.
Speaker Change: and R.
Speaker Change: really creating shareholder value and we'll see that in future years. But even if someone disagrees and considers that some of that growth investment is necessary just to keep our business steady, the cash flow per share we're seeing is world bust.
Speaker Change: to say the least relative to our share price. And that is, in summary, why we invested an additional $168 million for share repurchases in the surrounding 12 months through September.
Speaker Change: Now the final reason we're confident in deploying someone's capital is because we're doing so with an aclarly-to-creen-cated leverage policy.
Speaker Change: and a demonstrated track record of being able to do lever when we want to or need to. And as the most recent example of that track record, the growth investments and the share we purchase as I just described have totaled over $300 million in the past 12 months alone.
Speaker Change: Yet over that same period, we reduced our leverage from 3.5 to 3.1 times UBDU.
Speaker Change: Thank you Robert. So I'm going to ask another question that we received last night that is along similar lines.
Speaker Change: So here goes. We suspect that you agreed that the returns associated with repurchasing our sheriff today are materially more attractive than they were a few weeks ago.
Speaker Change: Will this impact what sorts of investment activities we prioritize?
Speaker Change: Given the 2.75 times leverage constraint that's been communicated. For example, are there higher uncertainty cap X investments that we made post-pone to take advantage of the irrational price being offered by Mr. Merkett?
Speaker Change: Okay, short answer is yes, because right now I think Simpros is.
Speaker Change: A case study, or a poster child, a Benjamin Graham's description of Mr. Market when he gets especially moody and irrational and the cash full map that I just shared a few moments ago is a good illustration of that value to price mismatch.
Speaker Change: So we plan to take advantage of that opportunity and to share a nice day's attractive. I would not be surprised if we had less than $100 million in share repurchases. This fiscal year will still ending up it.
Speaker Change: around 2.75x leverage or below at the end of this fiscal year.
Speaker Change: Now the tradeoff you mentioned is something we do talk about and when there's opportunity is bigger small we're looking not only.
Speaker Change: at CapEx, which you mentioned, but also OpEx and advertising and payment terms. And that being said, we are looking at them, but I would also caution to you to say that a lot of our success is coming from operational execution enough what we call a focus on focus.
Speaker Change: and that requires consistency and planning across what is a pretty large organization. And there can be very high costs to flipping back and forth in our organic investment levels and operating plans based on monthly fluctuations in our share price.
Speaker Change: We have high conviction in the cap act and the offer development.
Speaker Change: with talent, all recruitment from the advertisement that we've planned. And those projects are not very far out on the risk curve.
Speaker Change: Now we do recognize within that there are still trade-offs we can make and we expect to make but my comments are just to say it's not a switch we can turn on and off.
Speaker Change: I'm not sure if you're a question you were also asking about the 2.75 leverage objective for the end of fiscal 25, but let me address that in case you are.
Speaker Change: Whitewood operational management, I think the consistency to where we're going from a balance sheet perspective has to be a kind of bad impact that you are.
Speaker Change: I think we should be aware of and protect other than an extraneous or constance. And...
Speaker Change: Alright.
Speaker Change: We are maintaining our leverage expectation for this year as communicated even though one could make a pretty good argument that given some presses proven ability to be lever way we want to now is not time to deploy capital to leverage to reduce leverage given Mr. Markets current state of mind.
Speaker Change: But we think that consistency, like operational consistency is very helpful.
Speaker Change: I'm now right to share this question of share of a re-portitude is a regular topic, especially recently we've had with the board of directors given the share price for all two to our cash flow per share before and after our growth investment and we'll continue to take it very seriously.
Sean Quinn: Thanks very much Robert.
Speaker Change: Alright, we're going to shift gears and this next question will be for Sean. Sean, please help me understand the $18 million quarter over quarter swing in other income Flash expense. What are the main components of that line and how do they flow through to a justice free cash flow?
Sean Quinn: Sure, yeah, we'll drop right into the details here and there are some more details around our current view packs.
Sean Quinn: in our early thoughts, mid-digit section on currency impacts that I would point you to.
Sean Quinn: Yeah, there's some larger movements in this line in the TNL. The year of your changes was mentioned in the question, and our other income and expense was just under $80 million.
Sean Quinn: That line is mostly...
Sean Quinn: Driven by realize the number-lies currency gains and losses. So let me just explain the activity I go through there and then I'll just put some numbers to get that for Q1. So it's clear.
Sean Quinn: We have an active currency hedging program and we average into accommodation of four as an option to teach quarter based on our currency exposures. All based on currency exposures from an adjusted e-bit to a perspective.
Speaker Change: and you might as well, well, why didn't you do that?
Speaker Change: and the reason we do that is that in the past we've had EBW maintenance components and so the program.
Speaker Change: Designed to reduce volatility in our justice debate. So if there's ever a large move of currencies, we would add time to adjust. And then we also factor that into how much cushion we would need against those maintenance governance. Now of course today we don't have any EBITDA based maintenance governance.
Speaker Change: However, on our revover, if in the future we were to have a drawn balance, we might. And so we keep that program running as it was, and that program importantly has met a subjective of reducing currency volatility.
Speaker Change: The realized currency gains are losses from those edges, are included in our adjusted event that we record every quarter.
Speaker Change: The unrelines games, the losses are not in that adjusted EBITDA and that also flows through this other income line in tends to be the source of
Speaker Change: The majority of what is in that line so Q1
Speaker Change: The real life gains that we had from our currency hedges, with from a gain last year of 2 million to losses this year of 2 million and so that's a total change of 4 million of that about $18 million that went through that line. So that's the real life piece.
Speaker Change: and the first thing that we're going to do is to make sure that the EBITDA, it also then flows through to our cash flows well.
Speaker Change: We also support an adult when we have losses like we didn't Q1, real light losses on our caratcy hedges. There's also positive impacts.
Speaker Change: Above that mind, whether it be in our revenue or in our cost-based.
Speaker Change: and so there's some offset there and that's what gets you to the a little bit under one million dollars of negative impact to our EBITDA overall first of last year of concurrency and that's probably the most important takeaway for Q1 and then said that flows through to our Justice pre-cache flow.
Speaker Change: That remaining $14 million a year over your changes mostly the changes in our unrealized currency gains and losses.
Speaker Change: that doesn't impact our precaution in this quarter and those will continue to move around. Over time as they get more to market and they'll be realized there was a next 12 to 24 months.
Speaker Change: If there are laws that they're, again, that also means that there will be positive impacts from current to your blood that line over that period. I think if you take a step way back on all the stuff, the most important takeaway is we said last, we said in our commentary last quarter that
Speaker Change: for the full year of fiscal 25. Based on our contracted rates going into the year.
Speaker Change: that we expected the year of your impact of currency on our justice debate to be approximately neutral.
Speaker Change: and we still expect that to be the case. So there's some engine out there and the markets will create some volatility in that line but from overall, it just needed that perspective. We expect the impact the currency to be approximately neutral for the end.
Speaker Change: Great, thank you Sean.
Speaker Change: Alright, Sean, I'm going to stick with you. We got a trio of questions from investors on working capital. And so I will ask you all of these questions at once and you can combine for a single answer.
Speaker Change: We were surprised at how much of a use of cash are payables consumed last quarter which rose this large use of cash. The second question related to the above we know that there has been some noise and are working capital over the past two years.
Speaker Change: Would you mind reminding us which quarters you expect receivables and mentoring and payables will continue to be sources?
Speaker Change: or Wish Quarter Day will be used as a cash, for example, inventory, continuing to be a source in Q2, etc. And the last question, at investor day, you predicted working capital to be a source of cash for the full year, though less so than it was enough by 24, have the Q1 results altered your view and if yes, what has changed?
Speaker Change: Okay, let me try and hit all those that want
Speaker Change: and with the topic of working capital can be difficult to understand if there is a quarter of quarter of all facility there. I think first thing to say is that there's no structural changes in our working capital.
Speaker Change: That says if you look at any one quarter, it can be challenging because there's typically some time in differences, sometimes some of the screen items that drive fluctuations at work in capital. And that could be an either direction. But, absent any specific events like...
Speaker Change: The supply chain disruption that impact the inventory trends over the last few years, we would expect to have working capital in closing Q2.
Speaker Change: which is typically in the largest.
Speaker Change: and also in Q4. So the December quarter and the June quarter were in capital inflows.
Speaker Change: and that follows the seasonality of our revenues. So the quarters where we have our higher highest volume revenue and just to make that specific. And if you look at the December quarter for example, if we have our holiday peak in revenue, we receive cash from customers in most instances in the December quarter. And then we have payments for...
Speaker Change: Materials for shipping, for advertising, remittances of all the sale tax or BTC that we collect and so on. And so that's what that's what drives that sort of mismatch from a working capital perspective.
Speaker Change: So on the outflow side, we would then typically have outflow as for working capital in Q1 and Q3 and Q1 is typically a smaller outflow, Q3 is the larger one.
Speaker Change: We did guys, there was a part of the question asked about the full year of Brad by 20 by we did guide to have working capital in flows for the full year in FY25.
Speaker Change: Although less than FY-24 FY-24 is a particularly strong year with some specific drivers. That remains our expectation that we will have working on the inflows for the full year, although less than FY-24.
Speaker Change: for Q1, specifically let me get to some of those questions. Again, it's always a lot of time in here.
Speaker Change: and Q4 of last year was quite strong and sometimes what that means is you'll see the other side of that, the following quarter. So there's a little bit of that in here, again, that's all timing stuff.
Speaker Change: and Q1, we did have a little bit more inventory ramp up for the holiday preparation. Part of that to students, some of the challenges and shipping.
Speaker Change: through the Red Sea and so on. That's relatively minor, but when you compare against last year, last year, we were still unwinding some of that safety stuff that we had ramped up. So here over year, that creates a bit of a unfavorable swing.
Speaker Change: and then there are also a few other things.
Speaker Change: Good question about the impact of payables on working capital.
Speaker Change: There are a few one-off things related to specific suppliers and I just give you a few examples to make it tangible.
Speaker Change: Blastier, we had a technology contract that was reasonably material.
Speaker Change: where we approved terms and so we had that favorability last year.
Speaker Change: that doesn't repeat this year.
Speaker Change: Fisher read the other direction we had, another technology contract where we had unusually favorable terms.
Speaker Change: which were born in a zero interest rate world that shifted to more typical commercial terms of Q1. And that one was unique. But even just those two things alone are well over $5 million of fewer of your impact just as examples to make you tense.
Speaker Change: and Andrew Bullson. Again, no structural changes in working capital, quarter to quarter. You have these specific things that play a role. One other thing that I point out, because I think the question, who I remember after the question I think was probably looking at it from the Casual statement.
Speaker Change: I use those look at a count to pay a lot of crew expenses together in terms of those trends.
Speaker Change: there is cash interest payment they mentioned in the earlier remarks.
Speaker Change: that were $10.6 million higher and Q1 versus last year and that was because we brought forward the payments on our interest payments on our bonds as part of the redemption. So if you're looking at it from a cash flow perspective, that also flows through those lines, that's just a timey thing, but has some impact as well.
Speaker Change: and the first time I've seen this video, I'm going to show you how to make a video.
Speaker Change: Great Thank you Sean.
Speaker Change: Alright, so I'm going to move to Robert with a question about CapEx. Robert, in F-Q4 F-Q24, you said you planned to increase CapEx in 2025, but the cash outflow for PPE was lower this quarter. Have your plans changed or will those investments still happen just later in the year?
Robert King: I think the investment will still happen just later in the year.
Robert King: with the caveat around the discussion we had a few minutes ago about we are looking at all this stuff in terms of
Robert King: You know, other capital allocation opportunities who share buy-back splits.
Robert King: Given all my comments which are very important about the consistency of operational execution we are planning on those will still happen. Similar to working capital, 15 fluctuate, quarter quarter, it's also...
Robert King: Common Trust, to be testing and capital equipment to ensure it is our operating requirement and key performance indicators before we make full payment, spec and delay the cash out. So, based on those...
Robert King: Initial installation test and our payment terms is not uncommon that much of the cap-ax from a cash flow perspective appears in quarters after the equipment was actually received.
Speaker Change: Thank you Robert. I'll stick with you for the next question that is on our Go Design Business.
Speaker Change: Actually, two questions. We would have assumed that sales for bill-design would have increased materiality this quarter as a result of the election cycle. However, sales in North America for all other businesses.
Speaker Change: which we perhaps incorrectly assume are bell design. Increased only marginally relative to last year. Our election cycle is not that big of a sale driver for this business. And...
Speaker Change: Audit Curiosity, why was there a spike in intersegment revenue for all other business segments at by 25 relative to 21 at by 24?
Speaker Change: We'll be right back for the first question.
Speaker Change: are external revenue trends, thank you one for building a side of a very consistent with the recent past.
Speaker Change: specifically we see growth in signage that's being partially offset by decline and direct sales owns any customer sales of home decor products.
Speaker Change: You're correct at the election cycle did have some impact, a positive impact on the time is revenue, but I would characterize that as a helpful increment to our revenue not as a major material impact.
Speaker Change: for the second question, the rapid growth and intersegment, revenue comes from a very successful collaboration for cross-simpost settlement between VISTA and Dota Signs.
Speaker Change: Just as a reminder, across St.Prest fulfillment is when one St.Prest business produces for another St.Prest business.
Speaker Change: and we remain in a early stage of a multi-year effort to increase cross-simpressed fulfillment because it allows us to accelerate new product introduction and to drive down production costs.
Speaker Change: Thanks to the aggregation of volumes into focused production lines.
Speaker Change: Now, the other side specifically has very competitive production capabilities and signage and in home decor products. So over the course of fiscal 25, we are shifting most of this to more thermaries in.
Speaker Change: Production Value and for those two categories from VISTA to Bill the Sign.
Speaker Change: and this.
Speaker Change: has caused savings that are nearly immediate, but importantly, it freees up production space.
Speaker Change: and the University of the United States.
Speaker Change: for new lines which were installing for other product categories. Largely focused on exclusively focused around the growth categories we talked about.
Speaker Change: and...
Speaker Change: Those new investments will likewise be made available through cross-in-person fulfillment to all of the businesses in North America.
Speaker Change: and so.
Speaker Change: As a point of reference, the intersegment sales are not included in the regional split for revenue that we provide in our financial and operating metric spreadsheet. For example, in this case, build a side which constitutes the majority of our all-out of business.
Speaker Change: and Interstate Regiment revenue is fulfilling.
Speaker Change: Products and shipping them two VISTA customers in North America.
Meredith Burns: Thank you, Robert. Stick with you for this question that came in life. At the investor day, you discussed a modest multi-year revenue decline in the combined business cards and consumer products category.
Meredith Burns: You mentioned consumer products growing for the last five quarters and have previously discussed business cards growing at low single digit rate due to customer spending different use cases for business cards.
Speaker Change: Do you think the modest decline in these combined product categories can be reversed? Or should we think of this as a modest ongoing revenue headwind?
Speaker Change: So most of this question applies to VISTAs. Let me focus on what we see happening there, but I will note that this story is similar for the minority of VISTAs which applies to other parts of Symposium.
Speaker Change: Yes, we do think we can stop them out of decline and we are planning for roughly flat revenues between across these two mature traditional product categories.
Speaker Change: at our September and Vustoy Day.
Speaker Change: Florian showed a slide that unlike the strong growth we see in categories like signage marketing materials, promotional products, and parallel packaging, which account for the majority of this is growth. We've seen that flat growth in.
Speaker Change: Business Carred Dead and Consumer and the percentage of revenues is declined substantially. These newer categories that are growing.
Speaker Change: are the majority of our growths profit now, and they are also the most important categories for high value customers who are driving our growth.
Speaker Change: The Alchemist has a very attractive lifetime value which makes a contribution to profit after advertising favorable compared to the momentary category like business card and consumer. I'm also as we've discussed to that.
Speaker Change: Mix Shift does mean the gross margin percentage is pressure because business charging sooner products have a higher gross margin percentage. But...
Speaker Change: Alright, this is...
Speaker Change: is continuing to really excel well at protecting the profitability of these.
Speaker Change: and mature product categories through improved customer experiences, improved and expanded product ranges, premium substrates, sophisticated finishing options, price optimization, reducing discounts and advertising efficiency.
Speaker Change: Thank you Sean, did you want to add anything to that? If I could, I think you wanted to say that.
Speaker Change: and a little confusing for some of that in a better day.
Sean Quinn: We were comparing business cards and consumer and laughing that together because of some of the reasons Robert was described, you know, these are larger legacy categories differentiated from
Sean Quinn: and some of the more of a complex product that have high growth and we're very focused on now.
Sean Quinn: but we were comparing those back to 2018.
Sean Quinn: Now, from 2018 to now there happened to be a large pandemic. In the middle of that there was also...
Sean Quinn: Transformation in the VISTA business that included this.
Sean Quinn: Substance or Reduction and advertising. So there's a lot of noise when you look at it from FY18 to FY24. There's some noise in that that's other than the outside of the trends you might expect now. Just to bring that forward.
Sean Quinn: and I mentioned this in the earlier remarks from a consumer perspective. That's been growing over the last five quarters.
Sean Quinn: and we have an expectation that can continue to grow and there's a lot of benefits from the new product introduction that's happening broadly across.
Sean Quinn: Grant that has consumer relevance to the experience of provenance, design, improvement, and so on. And so we believe that that can continue to grow.
Sean Quinn: and business card I also mentioned in the earlier remarks that we saw a slightly client there. I just differentiate business cards that consume them in that way in terms of the more recent trends. Hopefully that helpful and bridge back to what we talked about in the best way.
Speaker Change: We have run out of questions, so I'm going to turn things back to Robert to wrap up.
Robert King: Okay, well thank you Meredith.
Robert King: In summary, we continued to execute in line with all the plans we've laid out for you in the September 10th Investor Day, hopefully some of the examples and the details we've shared with you today are helpful.
Speaker Change: I speak with key member the cross-shin press on a very regular basis and I'm very inspired by the talent I'm motivated how they...
Speaker Change: are seeking opportunities, they're addressing challenges and I want to thank them for their support and execution of our strategy.
Speaker Change: They're more than 15,000 simple steam members and they really are.
Speaker Change: successfully driving customer experience improvement, efficiency gains, new product introductions.
Speaker Change: Great high quality marketing and a lot more so
Speaker Change: These are key to extending our 30 year trends of growth in revenues and profitability.
Speaker Change: and the
Speaker Change: and the
Speaker Change: and the
Speaker Change: [inaudible]
Speaker Change: The
Speaker Change: Welcome to the Simpress Q1, fiscal year 2025 earnings call. I will introduce Meredith Burns by President of Mr. Relations, and Sustainability.
Meredith Burns: Thank you Michelle and thank you everyone for joining us and Happy Halloween to those two celebrate. With us today, our Robert King, our founder, chairman and chief executive officer, and Sean Quinn, EVP and chief financial officer.
Meredith Burns: 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 live questions and answer spots at the bottom left of the screen.
Meredith Burns: 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.
Meredith Burns: We have also published non-GAAP reconciliations for our financial results on our website as well. We invite you to read them. And now I will turn things over to Robert.
Robert King: Thank you, Meredith. Thank you to all of you for joining us.
Robert King: Sean in a moment is going to speak about our first quarter financial results, but first let me share some personal insights
Robert King: on how, across CINPRESS, our talented and our engaged team members are driving
Robert King: significant customer value and efficiency.
Robert King: Through focused execution and this call in particular is a great time to do so because
Robert King: I personally have just spent the month of October visiting over 20 different CINPRESS locations across North America and Europe, and the observations I want to share with you today are coming really straight from the front lines.
Robert King: So first of all, we are continually improving our customer experience. For example, in the past week, I sat side by side with team members from product development, with frontline designers.
Robert King: and as an even more specific example in one
Robert King: sit-down session. I was with one of our designers in our team in Tunisia and he was designing beautiful product labels for a high-value customer in our upload and print group who was extending her line of aromatherapy products and these are capabilities we simply didn't have a few years ago.
Robert King: Second, we are driving efficiency, improving quality, increasing speed of delivery across the value chain and as part of that month of travel
Robert King: I was at about a dozen of our production facilities and
Robert King: No matter what size of facility or what product focus, team members consistently demonstrated a combination of continuous improvement and capital investment, which together are reducing costs and improving quality.
Robert King: Third, we are growing lifetime customer value.
Robert King: and the lifetime value of our customers, as well as our revenues through more complex products and supporting.
Robert King: those complex products with customer experience improvements. For example,
Robert King: I visited our team in Europe who is responsible for flexible packaging and our U.S. team who's leading our drive into corrugated packaging. Both of these are small currently, but they're potentially large product categories in which we are currently growing at well over 25% a year.
Robert King: and the average lifetime value of these customers is many times our typical or our average customer. And almost all of these packaging customers are small and medium-sized businesses who form the core of SYNPRESS's total addressable market.
Robert King: Fourth, I really saw firsthand how VISTA has continued building momentum based on the foundations we've been investing in for five years or more, and that includes a modern, flexible technology and data infrastructure.
Robert King: The strengthening of Vista's product development capabilities and repositioning of VistaPrint away from the previous discount-driven brand image. And the results are really an improved customer experience that attracts and retains high-value customers.
Robert King: During my travels, team members who are part of the VISTA teams who are driving growth in packaging and logo apparel and large format walked me through production floor operations where I could personally touch and feel these gorgeous quality products.
Robert King: of countless real-life customers in these important growth categories.
Robert King: And last but not least, across all my visits, I saw how our select few shared strategic capabilities are really deeply integrated into the ways of working. They're helping us drive customer value and competitive advantage.
Robert King: As one of two examples I'll describe, I was...
Robert King: at a equipment
Robert King: supplier with a
Robert King: equipment supplier with whom we are working to develop yet even more innovation applications for a new product category we're working on.
Robert King: And likewise, in all my visits to our facilities, I saw how businesses are leveraging MCP's functionality for artwork, for e-commerce, for fulfillment operations, for cross-impress fulfillment, and for data.
Robert King: So, three months ago, SimPrice completed our record best fiscal year in terms of revenue and profitability. And looking forward,
Robert King: The type of focused execution that I'm describing today, which I personally saw over the last month, and our clear and consistent strategy, makes us confident that in fiscal 25, we're going to again set new records for both revenue and profits.
Robert King: More importantly...
Robert King: the type of frontline talent and the initiatives that I've had the pleasure of seeing.
Robert King: reassure me that for many years to come we can relentlessly improve the value we deliver to our customers and
Robert King: strengthen our print mass customization capabilities and in doing so
Robert King: We expect to continue to earn market share gains in this very large fragmented landscape where traditional competitors still account for the majority of the market.
Robert King: With that, Sean, let me turn it over to you to talk about our first quarter financial results.
Sean Quinn: Yeah, thanks a lot, Robert, and thanks for that summary. So to start, and as we noted in the earnings document that we released after the market yesterday, suppressed delivered solid results for the quarter. Consolidated revenue grew 6% on both a reported basis and an organic constant currency basis.
Sean Quinn: Adjusted EBITDA declined slightly year over year in Q1 to 88 million dollars inclusive of currency headwinds of just under a million dollars.
Sean Quinn: The obvious question that we would expect from investors is
Sean Quinn: with the context of our multi-year commentary that we've provided. Why didn't we see the revenue growth that I just mentioned translate into increased profitability, specifically increased adjusted EBITDA in Q1 versus last year?
Sean Quinn: There's no change to our multi-year guidance commentary and we remain confident in our ability to deliver against the growth and revenue adjusted EBITDA and free cash flow that we've outlined. Let me just walk through the QM results with that question in mind.
Sean Quinn: In Q1, it's typically our lowest volume revenue quarter and so OPEX increases like annual merit increases that we have including those for our central teams are less absorbed by revenue in our first quarter than they are during other quarters.
Sean Quinn: From a segment perspective, segment EBITDA increased in upload and print, it increased in national PIN and also in our all other businesses segment with higher gross margins across the board and also in some cases lower advertising as a percentage of revenue.
Sean Quinn: In VISTA, organic constant currency revenue growth was strong. It was 8%. And from a category perspective, what we saw in Q1 was very consistent with what we shared at our September Investor Day in terms of where we're seeing strength and also where we see headwinds.
Sean Quinn: Vista had a strong quarter in Europe across the board. In North America, revenue growth was solid there, but this is where we have a slight decline in revenue from business cards that has a bit more impact on product mix and therefore also a bit more impact on gross margin.
Sean Quinn: We had also planned in Q1 to have heavier advertising spend, not only actually in Q1, but also for the full first half of the year. You see that this quarter and that's not any material shift of note in terms of our advertising approach, but it does impact the year-over-year results for Q1.
Sean Quinn: So if you take a step back for VISTA, the organic constant currency revenue growth of 8% that we reported translated to 6% gross profit growth, but advertising spend grew about 12% year-over-year, and that's really the main impact of the flow-through in Q1. We also had a $1.8 million benefit in last year's VISTA results, and that didn't repeat this year.
Sean Quinn: Panning back out to our consolidated results, from a free cash flow perspective, free cash flow is lower year over year. The biggest driver of this was higher outflows from changes in working capital. You'll recall that last year, the working capital impacts of supply chain disruption were still normalizing, and so last year we had favorable inventory trends from a working capital perspective.
Sean Quinn: the other significant driver.
Sean Quinn: of the free cash flow decrease year over year was cash interest payments that increased $10.6 million versus the year ago period. And that was due to our senior notes refinancing, which brought forward the timing of our typical semi-annual interest payments on our prior senior notes that were due in 2026 that have now been redeemed.
Sean Quinn: From a balance sheet perspective, as just mentioned, during the quarter we successfully completed a high-yield notes offering for new eight-year notes that replaced our prior 2026 notes, and we concurrently extended the maturity and amended the interest rate.
Sean Quinn: of our existing revolving credit facility.
Sean Quinn: These steps, combined with the substantial reduction in net leverage since the peak in December of 2022, have significantly strengthened our balance sheet and also our debt maturity profile.
Sean Quinn: Very importantly, we've been able to make these balance sheet improvements and maintain strong liquidity, while also allocating capital to significant organic investments that we've outlined in more detail in our annual letter that was published back in July.
Sean Quinn: And over the last three quarters, we've also allocated $168 million to the repurchase of about 8% of our shares at what we believe to be very attractive multiples of earnings, cash flow, and steady state pre-cash flow.
Sean Quinn: We also allocated another $9 million to repurchases in the month of October.
Sean Quinn: and we plan to continue to do so if prices remain attractive, but all of that will still be subject to the leverage commentary that we previously outlined, which, as a reminder, would be to end this fiscal year with net leverage at or below approximately 2.75 times our Charlie to a month EBITDA as defined by our credit agreement if we're repurchasing shares.
Sean Quinn: Finally, we're of course now in our second quarter of the fiscal year, and that includes the holiday peak season. We had a pre-submitted question around our expectations for the upcoming season. We feel very good about our preparations and plans as that starts to ramp up.
Sean Quinn: Also, trends in VISTA's consumer product category have been good with growth in each of the last five quarters. Also, Q1 that we just reported here was strong. And that's really been benefiting from the focus of our consumer team.
Sean Quinn: from New Product Introductions, but also the overall experience improvements that we've talked about over the last few years.
Sean Quinn: That said, compared to last year, we do have five fewer selling days between American Thanksgiving and Christmas, and we also have the U.S. election. So we plan accordingly for those to the extent that we can, but those could dampen overall demand and year-over-year growth.
Speaker Change: With that, I'll turn it back to you, Meredith, for Q&A.
Meredith Burns: Wonderful. Thank you, Sean. As a reminder, you can submit questions during this webcast via the questions and answers box at the bottom left of the screen. Now, we received a number of pre-submitted questions, and we also look forward to taking your live questions as well.
Meredith Burns: So let's jump in with our first question that was pre-submitted. Robert, this question is going to be for you. What makes you confident enough to make such high levels of growth investments and share repurchases?
Robert King: Thanks for the question. Let me take those two subjects in turn, starting with growth investment, then I'll come to share repurchases.
Robert King: So we're confident in continuing at a
Robert King: As we had in fiscal 23 and fiscal 24, because of the strong performance we've demonstrated in terms of customer value improvements, competitive advantage enhancements, and financial results, and
Robert King: Our strong opportunity for the years ahead of us would not exist in the absence of those consistent investments in technology, talent, new product introductions, design enablement.
Robert King: next-generation manufacturing excellence
Robert King: and advertising that collectively underpin our customer value improvements and our competitive advantage of enhancements. So for Fiscal 24, we reported
Robert King: that those growth...
Robert King: investments from a cash flow perspective we're about 146 million dollars at the midpoint estimate and that as you know in your question we expected to continue with a growth investment level similar to that in this fiscal 25
Speaker Change: Now, as to my comment about strong financial results, let me be a little more explicit about what I mean. In my letter to shareholders from July, I spoke about our multi-year and multi-decade growth in terms of revenue and profitability.
Speaker Change: But focusing on where that trend has brought us to, in the last fiscal year, we generated about $10 in adjusted pre-cash flow per diluted share.
Speaker Change: Now, even after you adjust that for asset sales and some unusually favorable working capital.
Speaker Change: The cash flow per share was still about $8, and all of these cash flow numbers are after the roughly $146 million in growth investments.
Speaker Change: So that free cash flow per share leads to the second subject of your questions which is share repurchases.
Speaker Change: share repurchases make even more sense when, or especially make sense, when our share price is trading well today where it is relative to that free cash flow per share after growth investments.
Speaker Change: really creating shareholder value and we'll see that in future years. But even if someone disagrees and considers that some of that growth investment is necessary just to keep our business steady, the cash flow per share we're seeing is robust.
Speaker Change: to say the least relative to our share price. And that is in summary why we invested an additional $168 million for share repurchases in the trailing 12 months through September.
Speaker Change: Now, the final reason we're confident in deploying so much capital is because we're doing so within a clearly communicated leverage policy.
Speaker Change: and a demonstrated track record of being able to de-lever when we want to or need to.
Speaker Change: As the most recent example of that track record, the growth investments and the share repurchases I just described have totaled over $300 million in the past 12 months alone.
Speaker Change: yet over that same period we reduced our leverage from 3.5 to 3.1 times EBITDA.
Speaker Change: Thank you, Robert. So I'm going to ask another question that we received last night that is along similar lines.
Speaker Change: So, here goes. We suspect that you agree that the returns associated with repurchasing our shares today are materially more attractive than they were a few weeks ago.
Speaker Change: Will this impact what sorts of investment activities we prioritize given the 2.75 times leverage constraint that's been communicated. For example, are there higher uncertainty CapEx investments that we may postpone to take advantage of the irrational price being offered by Mr. Market?
Speaker Change: Okay, the short answer is yes, because right now I think SimPress is...
Speaker Change: a case study or a poster child of Benjamin Graham's description of Mr. Market when he gets especially moody and irrational and the cash flow math that I just shared a few moments ago is a good illustration of that value to price mismatch.
Speaker Change: So we plan to take advantage of that opportunity and if the share price stays attractive, I would not be surprised if we invest north of $100 million in share repurchases this fiscal year while still ending out that
Speaker Change: around 2.75x leverage or below at the end of this fiscal year.
Speaker Change: Now the trade-off you mentioned is something we do talk about and when there's opportunities big or small we're looking not only
Speaker Change: at CapEx, which you mentioned, but also OpEx and advertising and payment terms.
Speaker Change: And that being said, we are looking at them, but I would also caution you to say that a lot of our success has come from operational execution and what we call a focus on focus.
Speaker Change: and that requires consistency and planning across what is a pretty large organization and there can be very high costs to flipping back and forth in our organic investment levels and operating plans based on monthly fluctuations in our share price.
Speaker Change: We have high conviction in the CapEx, in the software development, the
Speaker Change: The talent recruitment and the advertisement that we've planned and those projects are not very far out on the risk curve.
Speaker Change: Now we do recognize within that there are still trade-offs we can make and we expect to make, but my comments are just to say it's not a switch we can turn on and off.
Speaker Change: Now I'm not sure if in your question you were also asking about the 2.75 leverage objective for the end of fiscal 25, but let me address that in case you are.
Speaker Change: Thank you.
Speaker Change: We are maintaining our leverage expectation for this year as communicated, even though one could make a pretty good argument that given SINPRESS's proven ability to be lever when we want to, now is not the time to deploy capital to reduce leverage given Mr. Market's current state of mind. But we think that consistency, like operational consistency, is very helpful.
Speaker Change: Now rest assured this question of share repurchases is a regular topic especially recently we've had with the Board of Directors given the share price relative to our cash flow per share before and after our growth investments and we'll continue to take it very seriously.
Speaker Change: Thanks very much, Robert. All right, we're going to shift gears and this next question will be for Sean. Sean, please help me understand the $18 million quarter-over-quarter swing in other income slash expense. What are the main components of that line and how do they flow through to a adjusted free cash flow?
Sean Quinn: Sure, yeah, we'll drop right into the details here and there are some more details around our currency impacts.
Sean Quinn: In our earnings document, there's a section on currency impacts that I would point you to.
Sean Quinn: Yeah, there's sometimes some larger movements in this line in the P&L. The year over year change, as was mentioned in the question in our other income and expense, was just under $18 million. That line is mostly
Sean Quinn: driven by realized and unrealized currency gains and losses. So let me just explain the activity that goes through there and then I'll just put some numbers against that for Q1 so it's clear.
Sean Quinn: From a currency perspective, we have an active currency hedging program, and we average into a combination of fours and options each quarter based on our currency exposures.
Sean Quinn: all based on currency exposures from an adjusted EBITDA perspective.
Sean Quinn: And you might ask, well, why do you do that?
Sean Quinn: And the reason we do that is that, in the past, we've had EBITDA-based maintenance covenants, and so the program...
Sean Quinn: is designed to reduce volatility in our adjusted EBITDA. So if there's ever a large move in currencies, we would have time to adjust. And then we also factor that into how much cushion we would need against those maintenance covenants. Now, of course, today we don't have any EBITDA-based maintenance covenants.
Sean Quinn: However, on our revolver, if in the future we were to have a drawn balance, we might. And so we keep that program running as it was, and that program, importantly, has met its objective of reducing currency volatility.
Sean Quinn: The realized currency gains or losses from those hedges are included in our adjusted EBITDA that we report every quarter.
Sean Quinn: The unrealized gains and losses are not in that adjusted EBITDA and that also flows through this other income line and tends to be the source of
Sean Quinn: the majority of what is in that line. So Q1
Sean Quinn: The realized gains that we had from our currency hedges went from a gain last year of $2 million to losses this year of $2 million, and so that's a total change of $4 million. Of that, about $18 million that went through that line. So that's the realized piece.
Sean Quinn: That realized piece is included in our adjusted EBITDA. It also then flows through to our cash flow as well.
Sean Quinn: We also, it's important to note when we have losses like we did in Q1, realized losses on our currency hedges, there's also positive impacts.
Sean Quinn: Above that line whether it be in our revenue or in our cost base
Sean Quinn: And so there's some offset there, and that's what gets you to the little bit under $1 million of negative impact to our EBITDA overall versus last year from currency, and that's probably the most important takeaway for Q1. And as I said, that flows through to our adjusted free cash flow.
Sean Quinn: That remaining $14 million year-over-year change is mostly the changes in our unrealized currency gains and losses.
Sean Quinn: That doesn't impact our free cash flow in this quarter. And those will continue to move around over time as they get more to market and they'll be realized over the next 12 to 24 months.
Sean Quinn: If there are losses there, again, that also means that there will be positive impacts from currency above that line over that period. I think if you take a step way back on all this stuff, the most important takeaway is we said in our commentary last quarter that
Sean Quinn: for the full year, fiscal 25, based on our contracted rates going into the year.
Sean Quinn: that we expected the year-over-year impact of currency on our adjusted EBITDA to be approximately neutral, and we still expect that to be the case. So, there's some ins and outs there, and markets will create some volatility in that line, but from an overall adjusted EBITDA perspective, we expect the impact of currency.
Sean Quinn: to be approximately neutral for the year.
Speaker Change: Great. Thank you, Sean.
Speaker Change: All right, Sean, I'm going to stick with you. We got a trio of questions from investors on working capital, and so I will ask you all of these questions at once, and you can combine for a single answer.
Would you mind reminding us which quarters you expect receivables, inventory, and payables will continue to be sources or which quarters they will be uses of cash, for example, inventory continuing to be a source in Q2, et cetera? And the last question, at Investor Day, you predicted working capital to be a source of cash for the full year, though less so than it was in FY24. Have the Q1 results altered your view, and if yes, what has changed?
Speaker Change: Okay, let me try and hit all those at once.
And I know that the topic of working capital can be difficult to understand. There is quarter-to-quarter volatility there. I think the first thing to say is that there's no structural changes in our working capital.
Speaker Change: That said, if you look at any one quarter, it can be challenging because there's typically some timing differences, sometimes some discrete items that drive fluctuations of working capital, and that could be that could be in either direction. But absent any specific events like
the supply chain disruption that impacted inventory trends over the last few years. We would expect to have working capital inflows in Q2.
Speaker Change: which is typically the largest.
and also in Q4. So the December quarter and the June quarter, we're in capital inflows.
And that follows the seasonality of our revenue. So the quarters where we have our highest volume revenue. And just to make that specific, if you look at the December quarter, for example, we have our holiday peak in revenue. We receive cash from customers in most instances in the December quarter. And then we have payments for
Speaker Change: for shipping, for advertising, remittances of all the sales tax or VAT that we collect and so on. And so that's what drives that sort of mismatch from a working capital perspective.
So, on the outflow side, we would then typically have outflows from working capital in Q1 and Q3, and Q1 is typically a smaller outflow. Q3 is the larger one.
We did guide, as part of the question asked about the full year for FY25, we did guide to have working capital inflows for the full year in FY25.
although less than FY24. FY24 is a particularly strong year with some specific drivers. That remains our expectation that we will have working capital inflows for the full year, although less than FY24.
For Q1, specifically, let me get to some of those questions, again, as always, there's a lot of timing in here. Q4 of last year was quite strong, and sometimes what that means is you'll see sort of the other side of that the following quarter. So there's a little bit of that in here. Again, that's all timing stuff.
Speaker Change: In Q1, we did have a little bit more inventory ramp up for the holiday preparation. Part of that's just due to some of the challenges in shipping through the Red Sea and so on. That's relatively minor, but when you compare it against last year, last year we were still unwinding some of that safety stock that we had ramped up. So year over year, that creates.
a bit of an unfavorable swing.
Speaker Change: And then there were also a few other things.
There was a question about the impact of payables on working capital. There are a few one-off things related to specific suppliers, and I'll just give you a few examples to make it tangible.
Last year we had a technology contract that was reasonably material.
Speaker Change: where we approve terms and so we had that favorability last year that doesn't repeat this year. This year we had, in the other direction, we had another technology contract where we had unusually favorable terms.
which were born in a zero-interest rate world that shifted to more typical commercial terms in Q1. Again, that one was kind of unique, but even just those two things alone are well over $5 million of year-over-year impact, just as examples to make it tangible.
Speaker Change: in the call.
I usually look at accounts payable and accrued expenses together in terms of those trends.
There is cash interest payments I mentioned in the earlier remarks that were 10.6 million dollars higher in Q1 versus last year and that was because we brought forward the payments on our interest payments on our bonds as part of the redemption so if you're looking at it from a cash flow perspective that also flows through those lines that's just a timing thing but has some impact as well in Q1.
Meredith Burns: Great. Thank you, Sean. All right. So, I'm going to move to Robert with a question about CapEx. So, Robert, in Q4 FY24, you said you planned to increase CapEx in 2025, but the cash outflow for PP&E was lower this quarter. Have your plans changed, or will those investments still happen just later in the year?
I think the investments will still happen just later in the year with a caveat around the discussion we had a few minutes ago about we are looking at all this stuff in terms of you know other capital allocation opportunities and share buybacks but
Robert King: Given all my comments, which are very important, about the consistency of operational execution, we are planning on those will still happen. Similar to working capital, this can fluctuate quarter to quarter.
Common for us to be testing capital equipment to ensure it hits our operating requirements and key performance indicators before we make full payment that can delay the cash out. So based on those
Thank you, Robert. I'll stick with you for the next question that is on our bill design business.
actually two questions. We would have assumed that sales for Build-A-Sign would have increased materially this quarter as a result of the election cycle. However, sales in North America for all other businesses
Speaker Change: which we perhaps incorrectly assume are bill defined, increased only marginally relative to last year. Our election cycle's not that big of a sales driver for this business and
Out of curiosity, why was there a spike in inter-segment revenue for all other business segments in Q1 FY25 relative to Q1 FY24?
Speaker Change: Okay, for the first question,
Our external revenue trends in Q1 for Build-A-Sign were very consistent with the recent past.
Specifically, we see growth in signage that's being partially offset by decline in direct sales of and customer sales of home decor products.
Speaker Change: You're correct that the election cycle did have some impact, a positive impact, on Sinai's revenue, but I would characterize that as a helpful increment to our revenue, not as a major material impact.
For the second question, the rapid growth in inter-segment revenue comes from a very successful collaboration for cross-impress fulfillment between VISTA and Build-A-Sign.
Just as a reminder, cross-SINPRESS fulfillment is when one SINPRESS business produces for another SINPRESS business.
and we remain in an early stage of a multi-year effort to increase cross-SINPRESS fulfillment because
It allows us to accelerate new product introduction and to drive down production costs thanks to the aggregation of volumes into focused production lines.
Now, Build-A-Sign specifically has very competitive production capabilities in signage and in home decor products. So over the course of fiscal 25, we are shifting most of VISTA's North American
Speaker Change: production volume for those two categories from VISTA to Build-A-Signer.
Speaker Change: and this
has cost savings that are nearly immediate, but importantly, it frees up production space.
in Vista's North American production facilities.
for new lines which we're installing for other product categories. It's largely focused, almost exclusively focused, around the growth categories we talked about.
Speaker Change: those new investments will likewise be made available through cross-improvement fulfillment to all of San Francisco's businesses in North America.
and so
Speaker Change: As a point of reference, the inter-segment sales are not included in the regional split for revenue that we provide in our Financial and Operating Metrics Spreadsheet. For example, in this case, Build-A-Sign, which constitutes the majority of our all-owner business.
inter-segment revenue is fulfilling.
products and shipping them to VISTA customers in North America.
Thank you, Robert. I'll stick with you for this question that came in live. At the Investor Day, you discussed a modest multi-year revenue decline in the combined business cards and consumer products categories.
Speaker Change: You mentioned consumer products growing for the last five quarters and have previously discussed business cards growing at low single-digit rate due to customers finding different use cases for business cards.
Do you think the modest decline in these combined product categories can be reversed or should we think of this as a modest ongoing revenue headwind?
So most of this question applies to VISTAs, so let me focus on what we see happening there. But I will note that the story is similar for the minority of this, which applies to other parts of SEMPRSS.
Speaker Change: Yes, we do think we can stop the modest decline and we are planning for roughly flat revenues between, across these two mature traditional product categories.
at our September Investor Day.
Speaker Change: The strong growth we see in categories like signage, marketing materials, promotional products, apparel, packaging, which account for the majority of VISTA's growth, we've seen that flat growth in
Speaker Change: the business cards and consumer, and as a percentage of revenues is declined substantially. These newer categories that are growing.
Speaker Change: are the majority of our gross profit now and they are also the most important categories for high value customers who are driving our growth.
They also have very attractive lifetime value, which makes their contribution profit after advertising favorable compared to the more mature categories like business card and consumer. Also as we've discussed, that
Vista is continuing to really excel well at protecting the profitability of these mature product categories through improved customer experiences, improved and expanded product ranges, premium substrates.
sophisticated finishing options, price optimization, reducing discounts, and advertising efficiency.
Thank you. Sean, did you want to add anything to that? Yeah, if I could, yeah. I think one of the things that...
might be, I don't know, a little confusing for some is that investor day
We were comparing business cards and consumer and lumping them together because for some of the reasons Robert just described, you know, these are larger legacy categories differentiated from
some of the more complex products that...
have high growth and we're very focused on now.
but we were comparing those back to 2018.
Speaker Change: Now, you know, from 2018 till now, there happened to be a large pandemic, you know, in the middle of that. There was also.
Speaker Change: Transformation in the VISTA business that included substantial reduction in advertising. So there's a lot of noise when you look at it from FY18 to let's say FY24. There's some noise in that that's other than the sort of outside of the trends you might expect now. So just to bring that forward.
Yeah, and I mentioned this in the earlier remarks.
Speaker Change: From a consumer perspective, that's been growing over the last five quarters.
And we have an expectation that can continue to grow. And there's a lot of benefits from the new product introduction that's happening broadly across.
that has consumer relevance to the experience improvements, design improvements, and so on. And so we believe that that can continue to grow.
In business cards, I also mentioned in the earlier remarks that we saw a slight decline there.
And so I just differentiate business cards and consumer in that way in terms of the more recent trends And yeah, hopefully that's helpful kind of a bridge back to also what we what we talked about an investor day
Thanks Sean. We have run out of questions so I'm going to turn things back to Robert to wrap up.
Okay, well, thank you, Meredith.
Robert King: In summary, we continue to execute in line with all the plans we've laid out for you in the September 10th Investor Day. Hopefully some of the examples and the details we've shared with you today are helpful.
I speak with team members across CINPRESS on a very regular basis and I'm very inspired by their talent and motivated how they
are seizing opportunities, they're addressing challenges, and I want to thank them for their support.
Speaker Change: execution of our strategy.
There are more than 15,000 SEMPREST team members, and they really are...
successfully driving customer experience improvements, efficiency gains.
new product introductions, great high-quality marketing and a lot more. So these are keys to extending our 30-year trends of growth in revenues and profitability and market share. So I'll wrap up by saying thank you to them and thank you to you, our investors, for joining the call and continuing to entrust your capital with us.