Cimpress NV Caps a Solid Year, Looks to Boost Organic Investments

Cimpress plans to double investments in its Mass Customization Platform in fiscal 2017. Image source: Cimpress.

With last quarter's surprise loss still fresh on investors' minds, mass customization specialist Cimpress NV (CMPR 1.64%) appears to be back on track with the release of its fiscal Q4 2016 results on Wednesday after the market close. Let's dig deeper into what Cimpress achieved in its latest quarter:

Cimpress results: The raw numbers

YOY = year over year. Data source: Cimpress. 

What happened with Cimpress this quarter?

• Adjusted net operating profit after tax (NOPAT) declined 14.6% year over year, to $16.9 million.
• Revenue grew 11% year over year excluding both currencies (which had a negligible effect on growth) and the contributions of acquired businesses.
• Generated $52.1 million in operating cash flow, up from $46.9 million in last year's fiscal fourth quarter.
• After primarily accounting for $17.8 million in property, plant, and equipment purchases, and roughly $8.1 million in capitalization of software and website development costs, generated free cash flow of $34.8 million, up from $23.2 million in the same year-ago period.
• Vistaprint business unit revenue climbed 11% year over year as reported, to $305 million, and grew 12% on a constant currency basis.
• Upload and Print business unit revenue jumped 94% as reported, to $146.5 million, albeit driven primarily by acquisitions. Excluding acquisitions and a 2% favorable currency impact, Upload and Print sales would have risen 21%.
• "Other" business unit revenue declined 8%, to $27.7 million, with no impact from foreign currency exchange.
• No shares were repurchased during the quarter, leaving fiscal year-to-date repurchases at 2,159,613 shares for roughly $153.5 million, or an average price per share of $71.06.
• Ended the quarter with $77.4 million in cash and equivalents, and $678.5 million in debt (net of issuance costs). Cimpress still has $427.5 million available for borrowing under a committed credit facility after accounting for debt covenant limitations.

What management had to say 

As Cimpress CEO Robert Keane stated:

We are entering the new fiscal year with strong momentum and optimism for our business. In light of this, we have established plans to increase our level of organic investment in fiscal 2017. Our philosophy and approach to allocating capital and tracking the return on such investments remains consistent with last year. I encourage investors to review my letter to investors published today on our investor relations website. That letter focuses on Cimpress' capital allocation philosophy, a financially oriented view of our investments past and future, and our views as to the underlying "steady state" cash generation capabilities of our company. 

For reference, that comprehensive letter to investors can be found here (opens PDF).

Looking forward 

Keep in mind Cimpress is no longer offering specific quarterly financial guidance after unveiling long-term plans last year to maximize intrinsic per-share value. Rather, management promised to offer annual updates on the company's "general view of potential organic growth rates," "how we think about value creation," and discretionary growth spending plans for each upcoming fiscal year. As such, Keane promised more details and a "qualitative view into our strategy and operations" at Cimpress' investor day scheduled for Aug. 10.

In the meantime -- and with the caveat that it is "not targeting any specific revenue growth rates for any particular quarter or year" -- Cimpress is enjoying "increasing confidence" that its Vistaprint business unit will be able to grow at double-digit constant currency rates. Vistaprint's near-term growth will be held back, however, by shipping price reductions.

Similarly, Cimpress is confident its Upload and Print business units will be able to sustain double-digit organic growth at constant currency for the forseeable future, though that growth will likely moderate from the levels it achieved in fiscal 2016. And finally, growth rates at all other business units will likely face headwinds in the near term "due to partner dynamics." Over the longer term, Cimpress sees "significant growth" for its Other business units.

Regarding its plans to bolster investments in organic growth, Cimpress most notably expects to roughly double its investment in its mass customization platform relative to 2016 (when it invested $27 million in free cash flow into the platform). These investments should allow Cimpress to significantly increase its capabilities and product selection, and serve as a cornerstone of its expectation to exit fiscal 2017 with the majority of transactions among its business units, factories, and third-party fulfillers occurring through the platform.

In the end, Cimpress' lack of specific guidance might drive some investors and analysts crazy as they try to quantify its financial progress with each passing quarter. But I applaud the company's effort to avoid the pressure of living up to Wall Street's near-term demands. As long as Cimpress continues to demonstrate progress against its strategic long-term goals, I think investors should be happy with where it stands.