Cimpress Plc Q2 FY2025 earnings call

• Robert emphasized that Q2 results were disappointing but they are addressing underlying issues and doubling down on strategic and operational objectives. The company has confidence in its ability to grow profits and cash flow through focused production hubs, cost of goods management, and new product introductions. - Sean discussed the financial results, noting one-time items and the impact of US performance, especially in Vista. He highlighted issues like lower organic search performance, higher ad costs, and competitive intensity in the US. The company is optimizing against changes, and there are progressions in cross-Cimpress fulfillment, such as BuildASign ramping up fulfillment for Vista.

The financial results for Cimpress in Q2 were disappointing. The vast majority of the weakness was in the US. In Vista, there were issues with lower performance in organic search due to Google algorithm changes, higher cost of performance advertising, and competitive intensity. Business cards and holiday cards in the US saw market demand down. National Pen and BuildASign also had challenges. Signage, promotional products, and packaging categories had strong growth globally but couldn't offset the weakness in higher-margin legacy products in the US. Revenue for the company grew 2% on reported and organic constant currency basis, but adjusted EBITDA declined. Vista contributed a significant portion to the weakness, with consumer categories like business cards and holiday cards being impacted. For example, in Vista, consumer category revenue was affected by shorter holiday season, higher ad costs, and competitive behavior. BuildASign saw declines in home decor and Canvas Print revenue. National Pen had a lower growth channel in direct mail advertising.

• The company revised the full-year outlook due to Q2 underperformance. For the second half of the year, it expects revenue in constant currencies to grow at least 4%, adjusted EBITDA to be at least $220 million, and adjusted free cash flow to be at least $50 million. - Net leverage is expected to be approximately 3.0 times trailing total bond EBITDA as calculated under the credit agreement, with plans to reduce to approximately 2.5 times or below, but slightly delayed from prior expectations.

• Potential tariffs on Canadian goods and repeal of de minimis exemption on imports to the US could impact the company. The company has experience moving facilities but would need to adjust production and pricing in case of such changes. - Changes in Google core algorithm and search engine results page in the US impacted organic search and new customer acquisition in Vista, particularly in business cards and consumer categories.

Q: How is EBITDA tracking in October and November given the repricing of term loan and Q2 underperformance?

A: Sean Quinn said in Q2, the holiday peak is a concentrated period, and the year-over-year profit impact combined with condensed buying period was not known until closing books for December. Relative to early December, results were worse than expected, and forecasting from a consumer perspective became harder.

Q: Given net leverage and weaker EBITDA, do you anticipate buying stock and will the Board reevaluate leverage policy?

A: Sean Quinn said with the at least framework guidance, there is room for share repurchase but not material. The Board has no plan to reevaluate the leverage policy as of now, with the focus on using EBITDA expansion and free cash flow to move towards the target leverage.