Cimpress Plc Q3 FY2025 earnings call

• Elevated products like promotional products, apparel, signage, packaging, and labels are growing strongly, with higher order values, replenishment needs, and higher lifetime value for customers.
• Cross-Cimpress fulfillment is accelerating new product introductions and lowering cost of goods sold. Pixartprinting's U.S. facility is operational and will launch its U.S. website.
• Legacy products and certain channels face headwinds; teams are responding to tariff threats by focusing on sourcing alternatives, price adjustments, and mitigating customer impact.
• Focus on customer value, innovation, data-driven decision making, and scale-based advantages to navigate challenges like tariffs, leveraging past experiences in adversity.

Consolidated revenue grew 1% on a reported basis and 3% on an organic constant currency basis. Vista had 3% organic constant currency growth, with key categories like promotional products, signage, packaging, and labels growing double-digit. National Pen faced lackluster growth due to reductions in mail order advertising. Cross-Cimpress fulfillment continued to grow quickly, and Pixartprinting's U.S. facility is live and set to launch its U.S. website. In terms of revenue contribution, elevated products such as promotional products, apparel, signage, packaging, and labels are growing rapidly and contribute to serving higher lifetime value customers.

• Withdrew guidance for FY 2025 and beyond due to tariff and trade uncertainty.
• Expect Q4 to be seasonally higher in profit and cash flow, leading to increased liquidity for FY '26.
• Balance capital deployment between organic growth investments, deleveraging, and share repurchases, with a focus on attractive share repurchase opportunities.

• Tariff impacts on Chinese sourced raw materials, particularly in the PPAG category, with efforts underway to mitigate but uncertainty remains.
• Uncertainty in tariff and trade environment affecting demand and potential substitution or trade-down in product orders.
• Exposure to third-party suppliers' China tariff impacts, which are harder to fully quantify.

Q: Which customer verticals are most exposed to tariff impacts and what's their revenue percentage?

A: Very little concentration by end customer vertical; broad groupings like health care represent no more than 7-8% of revenue. Largest exposure is in PPAG category, over 20% of consolidated revenue.

Q: Is it reasonable to expect $30 million in tariff expense on $20 million remaining China COG?

A: Math is broadly correct but need to consider pricing changes and volume impacts; net impact won't be exactly $30 million as pricing and alternative products will be used.

Q: Post Liberation Day, will costs be cut?

A: Yes, costs can be reduced as needed, with current constraints in place and ability to flex costs in past periods.

Q: Update on revenue growth in April?

A: April is stable to March trends, considering holiday timing shifts, and stable across regions.

Q: Why is National Pen's growth low?

A: Due to reductions in mail order advertising and headwinds in the mail order channel.

Q: Competitive landscape in elevated vs legacy products?

A: Elevated products have higher order values, replenishment needs, and lifetime value; gross margin varies but focus is on gross profit and customer value.

Q: Confidence in long-term gross margin profile?

A: Focus on gross profit, with examples like Upload and Print businesses generating strong cash flow despite initial gross margin differences.

Q: CapEx investment cycle?

A: Majority of CapEx in Vista and Print Group, with Print Group's U.S. facility a multi-year plan; others are ongoing choices evaluated on returns.

Q: Share buybacks vs internal investments?

A: Trade-off evaluated, with focus on internal investments with attractive returns, but flexibility to consider share repurchases when appropriate.

Q: Rationale for withdrawing long-term guidance?

A: Due to tariff and trade uncertainty and potential impact on demand, making long-term forecasting unhelpful.