Cimpress PLC (CMPR) Q2 2025 Earnings Call Highlights: Navigating Market Challenges and ...

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Thu, Jan 30, 2025, 11:29 PM 4 min read

Consolidated Revenue Growth: 2% on both a reported basis and organic constant currency basis.
Adjusted EBITDA: Declined by over $34 million year-over-year.
Adjusted EBITDA Expectation: At least $220 million for the second half of the fiscal year.
Adjusted Free Cash Flow Expectation: At least $50 million for the second half of the fiscal year.
Revenue Growth Expectation: At least 4% in constant currencies for the second half of the fiscal year.
Net Leverage Expectation: Approximately 3.0 times trailing total bond EBITDA by year-end.
Market Performance: Weakness in the US market, particularly in consumer-related holiday products and business cards.
Growth Categories: Strong growth in signage, promotional products, and packaging globally.

Warning! GuruFocus has detected 5 Warning Sign with CMPR.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Cimpress PLC (NASDAQ:CMPR) is confident in its ability to grow profits and cash flow through focused production hubs and new product introductions.
The company is seeing high growth from Vista's highest value customers and in new growth categories across Cimpress.
Cimpress PLC (NASDAQ:CMPR) has a strong track record of profitable growth and is committed to maintaining its strategic focus.
The company is expanding its Upload & Print business model to the US, leveraging its success in Europe.
Cimpress PLC (NASDAQ:CMPR) is actively optimizing its advertising spend and pricing strategies to improve performance.

Negative Points

Cimpress PLC (NASDAQ:CMPR) delivered disappointing Q2 financial results, primarily due to underperformance in the US market.
The company faced challenges with organic search performance in the US, impacting new customer acquisition.
Higher advertising costs and competitive discounting in the US market negatively affected profitability.
There was a decline in business cards and holiday cards sales, with market demand down in the US.
The company's net leverage is higher than its target, delaying plans to reduce it to 2.5 times.

Q & A Highlights

Q: To what do you attribute the underperformance in business cards and holiday cards? Should we be thinking about this as incremental secular pressure on those product lines, and what trends in these categories are baked into your multiyear outlook? A: Sean Quinn, EVP and CFO, explained that the decline in Vista consumer revenue was partly due to the Canadian postal strike and a shorter holiday season. The higher cost of performance advertising and competitive behavior also impacted holiday cards. Business cards in the U.S. were affected by changes in organic search, but the company does not see a sudden change in demand. The multiyear outlook does not assume growth for these products.

Q: Why does it make more sense to have Pixartprinting enter the US market versus extending an existing Cimpress business with infrastructure already built stateside into Upload & Print? A: Robert Keane, CEO, stated that the Upload & Print business model is complementary to other Cimpress segments and serves different customer needs. The production infrastructure is specialized for larger order quantities and complex products, which aligns with the new Pennsylvania facility. The new Pixartprinting facility will also produce products for other Cimpress brands, leveraging focused production hubs.

Q: We were surprised by the low growth experienced by both National Pen and all other businesses this past quarter. For National Pen, how material is their mail order business? And is that the main headwind facing that business? A: Sean Quinn noted that National Pen has been optimizing direct mail for profitability, which impacted revenue. Direct mail is about 25% of National Pen's revenue, while e-commerce, telesales, and cross-Cimpress fulfillment are growing and now larger than direct mail. BuildASign saw growth in signage but declines in home decor, with cross-Cimpress fulfillment driving growth.

Q: Can you unpack the updated second half FY25 guidance as it pertains to Vista? How are you thinking about the growth cadence at Vista throughout the remainder of the year? A: Sean Quinn indicated that Vista and Upload & Print will continue to be significant contributors to segment EBITDA. Vista is expected to grow in the second half, with more meaningful year-over-year EBITDA growth. The year-over-year ad spend profile will be more favorable in H2, and Upload & Print is expected to maintain its growth trends.

Q: If tariffs are put in place on Canadian goods and if the de minimis exemption on imports to the US is repealed, how might the company respond? A: Robert Keane explained that Cimpress has been scenario planning for potential tariff changes. The company has production facilities across North America and could move equipment if necessary. While the current US facilities couldn't handle all volumes without expansion, Cimpress has experience relocating production and would consider pricing adjustments if needed.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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