Image source: Cimpress.
When Cimpress NV (CMPR +1.62%) presented its latest fourth-quarter results on July 29, shareholders turned a cold shoulder to the custom print service. Shares fell as much as 20% the next day. Two weeks later, the stock has climbed back a little bit but remains 14% below pre-earnings levels.
The company formerly known as Vistaprint didn't exactly disappoint in the fourth quarter. Sales grew 13% year over year to $381 million. Adjusted earnings decreased by 12%, landing at $0.66 per diluted share. Analysts would have settled for earnings of $0.39 per share on roughly $360 million in sales. Under most circumstances, this would have qualified as a blowout quarter.
In constant-currency terms, sales grew 12% in North America and 35% in Europe. Cimpress is also on an extended spending spree, acquiring small custom print businesses around the world to expand into new markets. These tuck-in buyouts boosted sales approximately as much as currency exchange effects slowed things down. Excluding both of these unique line items, Cimpress grew revenues by 12% to 14% in every market.
Average order values increased 9% year over year to $42.50 and the company decreased its advertising and commissions expenses.
None of these results would trigger a 20% panic sale, but that's what happened anyhow. Cimpress stirred up investor nerves by announcing the end of full-year earnings and revenue guidance. Instead, management will measure success by unlevered cash flow per share results -- in the long term.
Cimpress CEO Robert Keane. Image source: Cimpress.
This newfound focus on long-term cash generation in a shareholder-friendly format may lead to temporary speed bumps along the way. In a separately published letter to investors, Cimpress CEO Robert Keane admitted as much. He wants to deliver annual cash flow growth of more than 10% in the core Vistaprint business, and even faster growth in other operations. But smooth sailing is out of the question:
"Because we are focused on maximizing our long-term intrinsic value per share and intend to allocate capital in accordance with that objective, we are not targeting these potential revenue growth rates for any particular quarter or year," Keane wrote.
Why not provide guidance on standard metrics such as earnings per share and revenues? Keane fears that his board of directors and executive team might be distracted by these increasingly irrelevant numbers.
"We will stop reporting many of the operational metrics we have previously reported on because, given the changes we have made over the relatively recent past, they are no longer relevant to how our top management and our supervisory board views and measures our business," Keane wrote.
On that note, those crucial free cash flows more than doubled in 2015. Thanks to strong reports for the first two quarters of this fiscal year, Cimpress shares still trade 48% above their year-ago prices.
Here at The Motley Fool, we tend to applaud long-term focus over short-term myopia, and this case is no different. The clearly stated preference for setting multiyear goals -- measured in cash profits per share, no less -- is a pretty obvious plus, at least in my book.
So we'll lose some management hand-holding on the widely reported top and bottom lines. That's a problem for Wall Street analysts, who must set their own target figures for both quarterly and annual reporting periods. For them, it's very useful to have a clear idea of what management expects.
But some of the best businesses on the planet don't offer any such guidance at all. Often, you'll see these mavericks invoke exactly the same reasoning as Cimpress just did: Management isn't aiming for excellence on these metrics in the first place, so why waste time and assets on trying to estimate them?
From that point of view, nervous investors took a positive long-term development and turned it into a quick share price discount. I don't know about you, but that looks all backward from where I'm sitting.
