Cimpress N.V. Prints a Decent Quarter

Credit: Cimpress N.V.

With a fresh long-term vision for shareholder value creation in mind, Cimpress N.V. (CMPR 0.93%) announced fiscal first-quarter 2016 results Wednesday after the market close. Though shares initially declined as much as 3.5% early Thursday as the results were technically mixed relative to expectations, Cimpress stock largely recovered to trade around breakeven later in the day.

Let's take a closer look at what Cimpress accomplished this quarter:

Cimpress results: The raw numbers

Data Source: Cimpress.

What happened with Cimpress this quarter?

• Adjusted net income of $0.49 per share, beating expectations for $0.47 per share.
• Revenue fell slightly short of expectations for $376.9 million.
• Currency headwinds held back growth; revenue would have climbed 21% on a constant-currency basis.
• Excluding both currencies and the revenue contribution of acquired businesses, revenue grew 11% year over year.
• Generated $25.7 million in operating cash flow, down from $52.6 million in fiscal Q1 last year.
• Generated negative free cash flow of $1.9 million compared to positive free cash flow of $32.3 million in the same year-ago period.
• Decreases in net income and cash flow were deliberate, and due to planned incremental investments in multiple areas, including Cimpress' mass customization platform, product expansion, acquisition integration, Vistaprint business unit advertising, and supporting the fast-growing "Most of World" business unit.
• Vistaprint business-unit revenue climbed 2% on a reported basis -- 8% at constant currency -- to $265.2 million.
• Upload and print business-unit revenue increased 98% -- 118% at constant currency -- to $76.5 million.
• "Other" business-unit revenue fell 3% -- but increased 13% at constant currency -- to $34 million,
• Repurchased 1,976,250 ordinary Cimpress shares for $140.2 million, or $70.95 per share.
• Closed on acquisition of Tradeprint on July 31, 2015

What management had to say 
Cimpress CEO Robert Keane stated: "Fiscal year 2016 is off to a solid start with continued execution against our long-term objectives. We are pleased with the improving retention trends in the Vistaprint business unit and the performance of recently acquired businesses."

Referring to Cimpress' new long-term vision, Keane elaborated: "As we have said many times, we believe that a significant portion of our intrinsic value per share will come from intelligent capital allocation. In the first quarter, we are pleased to have executed to plan and in line with the strategy and objectives we described in detail at our August 2015 investor day."

Looking forward 
As it implements long-term plans to maximize intrinsic value per share, Cimpress chose last quarter to no longer provide specific revenue and earnings guidance. Instead, according to Keane in a lengthy letter to investors at the time, they will offer 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.

For now, there are no changes to Cimpress' overall outlook. But it did offer select updates on its aforementioned business units.

First, the Vistaprint business unit is expected to grow at a single-digit constant-currency rate in the near term, with the potential to accelerate to above 10% "over the coming years." Second, upload and print should enjoy stronger double-digit constant-currency growth, and is expected to outpace Vistaprint's growth for the foreseeable future.

Third, all other business units should achieve single-digit constant-currency growth, thanks primarily to winding down of "certain partner revenue" at Albumprinter and Corporate Solutions, which are significantly larger than the faster-growing Most of World BU. Over time, as Most of World gains scale, the "other" line could accelerate to double-digit growth.

For investors or analysts brave enough to try and use this outlook in their models, Cimpress management made it clear that, "[W]e are not targeting these potential revenue growth rates for any particular quarter or year."

That's fair enough. In fact, while it might be maddening to investors and analysts accustomed to receiving more detailed guidance, I think it's refreshing to see Cimpress take a decidedly more broad, long-term-oriented approach to generating shareholder value. While the market might not feel the same way, the most we can do is patiently watch to make sure Cimpress continues to make progress in its efforts to accomplish that goal.