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Cimpress NV Posts a Surprise Loss

By Steve Symington - Apr 28, 2016 at 1:57PM

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But its long-term story hasn't changed.


Part of Cimpress' mass customization platform. Image source: Cimpress.

Cimpress NV (CMPR 1.04%) announced a surprise fiscal third-quarter 2016 loss Wednesday after the market close. With shares of the mass-customization specialist down around 7% Thursday as of this writing, it's apparent the market isn't pleased.

But putting aside the fact that Cimpress opted to stop providing specific financial guidance as it implements long-term plans to maximize intrinsic per-share value unveiled last year, the company also insisted that it continues to make progress in its primary strategic initiatives.

Let's take a closer look at what Cimpress accomplished in its latest quarter:

Cimpress results: The raw numbers

 Metric

Fiscal Q3 2016 Actuals

Fiscal Q3 2015 Actuals

Growth (YOY)

Revenue

$436.8 million

$339.9 million

28.5%

GAAP net income (loss)

($33.4 million)

$8.6 million

N/A

GAAP EPS (loss)

($1.06)

$0.26

N/A

Data source: Cimpress.

What happened with Cimpress this quarter?

  • The net loss was largely driven by a goodwill impairment charge during the quarter related to one of Cimpress' 2015 acquisitions in Europe. 
    • CFO Sean Quinn explained, "Although we are disappointed that the outlook that prompted the partial impairment for this particular business is less favorable than originally expected, we still expect the upload and print portfolio as a whole to return above the 15 percent hurdle rate we use for M&A."
  • Adjusted net operating profit after tax (NOPAT) grew 54% year over year, to $24 million
  • Foreign currency exchange continues to hold back top-line growth; on a currency-neutral basis, revenue would have increased 31%.
  • Revenue grew 10% year over year excluding both currencies and the contributions of acquired businesses.
  • Generated $23.9 million in operating cash flow, compared to $1.6 million in the same year-ago period.
  • After primarily accounting for $19.1 million in property, plant, and equipment sales, and just over $6 million in capitalization of software and website development costs, free cash flow was negative $1.3 million, compared to negative $17.5 million in last year's fiscal third quarter.
  • Vistaprint business unit revenue increased 8% year over year as reported, to $289.9 million, and rose 10% on a constant currency basis.
  • Upload and Print business unit revenue more than tripled as reported, to $116.4 million, largely driven by acquisitions. On a constant currency basis and excluding acquisitions, Upload and Print sales still would have climbed 25%.
  • "Other" business unit revenue fell 7%, to $30.6 million, and dropped 3% at constant currency.
  • Repurchased 156,778 ordinary Cimpress shares for $11.3 million, for an average price of $71.84 per share.
  • Also issued 112,364 new shares as part its now-closed acquisition of German web-to-print specialist WIRmachenDRUK.

What management had to say 
As Cimpress CEO Robert Keane said:

We progressed toward our strategic objectives and deployed capital and resources across both organic opportunities and acquisitions. We improved the Vistaprint business unit across key customer, product, revenue, and profitability metrics and we grew our Upload and Print business units both organically and through acquisition, including through the recently closed WIRmachenDRUCK transaction. We also built foundations in our Most of World and Corporate Solutions business units. Our mass customization platform team increased product selection, including the launch of several products fulfilled via the platform to multiple Cimpress business units.

Looking forward 
As part of its aforementioned long-term value creation plans outlined this past August, recall that, in lieu of financial guidance, management pledges 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 -- and similar to last quarter -- management offered no significant changes to Cimpress' overall outlook.

That said, Quinn did note aggregate investments so far this year across "a few categories are lower than originally planned," including the plant network component of its mass customization platform, Columbus, Most of World, and post-merger integration. So the full-year adjusted NOPAT burden of these major organic investments will be slightly lower than expected. Aggregate capital expenditures are also slightly lower than planned, which should increase free cash flow relative to Cimpress' initial full-year expectations. 

In the end, this was a largely solid quarter apart from Cimpress' surprising acquisition-related goodwill impairment charge. So while it's no surprise to see shares falling today, it seems the company's long-term story remains firmly intact.

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