Cimpress NV Starts the Fiscal Year Strong, Announces Vistaprint Restructuring

Cimpress NV (CMPR 0.21%) released fiscal first-quarter 2018 results on Wednesday after the market closed, highlighting strong revenue growth and a surprise profit driven by a combination of one-time items, lower acquisition expenses, and the fruits of its previous decentralization effort. The mass-customization specialist also announced plans to restructure its core Vistaprint business.

With shares closing up more than 7% on Thursday in response, let's take a closer look at how Cimpress kicked off its new fiscal year.

IMAGE SOURCE: CIMPRESS.

Cimpress results: The raw numbers

*For the quarter ended Sept. 30, 2017. Data source: Cimpress. 

What happened with Cimpress this quarter?

• As a consequence of its long-term initiative to maximize its intrinsic per-share value, Cimpress doesn't provide specific quarterly financial guidance. But consensus estimates predicted Cimpress would incur a net loss of $0.41 per share on revenue of just $524.7 million.
• However, GAAP operating income was $46.6 million, benefiting from a combination of a $47.5 million gain on the previously announced sale of Albumprinter to Gilde Buy Out Partners, $10 million in savings related to Cimpress' restructuring/decentralization initiative, and lower acquisition expenses.
• Following the divestment, Cimpress also entered into an agreement through which Albumprinter will continue to fulfill photobook orders for Vistaprint using its mass-customization platform.
• Adjusted (non-GAAP) net operating profit jumped to $10.4 million, compared to $2.7 million in the same year-ago period, driven primarily by cost savings from the decentralization.
• Excluding currency fluctuations and contributions from acquired businesses, Cimpress' revenue climbed 12%.
• By business segment:
• Vistaprint revenue increased 11% year over year (10% at constant currency) to $319 million.
• Upload and print revenue climbed 22% (16% at constant currency) to $160.4 million.
• Revenue from personalized-products business National Pen -- which was acquired just under a year ago for $218 million -- was $59.7 million.
• Revenue from all other businesses climbed 7% (5% at constant currency) to $28.1 million.
• The company generated operating cash flow of $16.4 million, and unlevered free cash flow of negative $6.5 million.
• Cimpress spent $40.7 million to repurchase 452,820 shares during the quarter, ending the quarter with $42.8 million of cash and equivalents and $820.8 million of debt, net of issuance costs. Cimpress also had $262.4 million available for borrowing under its committed credit facility.

What management had to say

Cimpress CEO Robert Keane stated:

We are off to a solid start for fiscal year 2018. Our businesses delivered strong results in terms of the value they are creating for their customers, and our financial results are on track relative to our internal objectives for fiscal year 2018 growth in revenue and unlevered free cash flow. We entered this fiscal year with our new decentralized operating structure that we announced on January 25, 2017, and we have seen the intended benefits, including tightened coordination between marketing and manufacturing activities throughout our businesses, reduction of complexity and costs, and an improved ability to evaluate performance and assess returns on the capital we invest.

As a result of the decentralization, almost 3,000 employees who were previously part of the company's central teams were transferred to Vistaprint. After two quarters of operating with the integrated teams, however, Keane said that the company has made the "difficult but appropriate decision" to restructure the Vistaprint business over the next two months.

"These changes will reduce headcount and other operating costs, but also simplify and streamline operations and more closely align functions to increase the speed of execution," Keane added.

Looking forward

Cimpress expects the Vistaprint restructuring to further reduce 2018 operating expenses by between $20 million and $22 million -- though it will  also mean incurring one-time charges of roughly $15 million to $17 million in the current fiscal second quarter.

In the end, Cimpress' results weren't quite as strong as its GAAP financial measures initially made them appear. But even putting aside the one-time divestment benefit, this was a good quarter in which the company continued to drive solid revenue growth and hone its operational focus. Given that showing, it was no surprise to see shares of Cimpress touch a fresh 52-week high on Thursday.