Cimpress NV Stays the Course as Profits Disappear

By Markets Fool.com

Cimpress's Mass Customization Platform, Image source: Cimpress.

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Cimpress NV(NASDAQ: CMPR) reported a wider-than-expected quarterly loss Wednesday after the market close, and shares fell more than 14% Thursday as a result.It's all relative, of course, considering that Cimpress stopped providing specific financial guidance last year, primarily as it outlined a new long-term approach ofmaximizing its intrinsic per-share value. Let's take a closer look, then, at how Cimpress kicked off its latest fiscal year.

Cimpress results: The raw numbers

Metric

Fiscal Q1 2017 Actuals

Fiscal Q1 2016 Actuals

Growth (YOY)

Revenue

$443.7 million

$375.7 million

18.1%

GAAP net income (loss)

($27.8 million)

$12.1 million

N/A

GAAP EPS (loss)

($0.92)

$0.32

N/A

YOY = year over year. Data source: Cimpress.

What happened with Cimpress this quarter?

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  • Adjusted net operating profit after tax (NOPAT) was a loss of $4.7 million compared to a profit of $16.4 million in last year's fiscal first quarter.
  • Revenue increased 6% year over year, excluding both currencies and the contributions of acquired businesses.
  • Generated $9.6 million in operating cash flow during the quarter.
  • After primarily accounting for $19.3 million in property, plant, and equipment purchases, and $8.3 million in capitalization of software and website development costs, free cash flow was negative $18.1 million.
  • Vistaprint business unit revenue grew 7% year over year as reported, to $285.4 million, and increased 8% on a constant-currency basis.
  • Upload and Print business unit revenue grew 72% as reported, to $132 million, driven primarily by acquisitions. Excluding the contributions of acquisitions and a 1% unfavorable currency impact, Upload and Print sales would have increased 12%.
  • "Other" business unit revenuefell 17%, to $26.3 million, and declined 19% excluding a 2% favorable impact of foreign 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 $53.6 million in cash and equivalents, and $682.5 million in debt (net of issuance costs). Cimpress still has $419.3 million available for borrowing under its committed credit facility.
  • Cimpress also implemented a "notional cash pool" during the quarter, allowing the company to keep less cash on hand to fund operations of certain subsidiaries. This makes more cash available for strategic investments or repaying debt.

What management had to say

As Cimpress CEO Robert Keane stated:

Fiscal year 2017 is off to a solid start and we are executing well against our plans to invest in a broad spectrum of long-term organic investments as outlined at the beginning of the fiscal year.We continue to have confidence that, even though these investments are depressing near-term profitability, they will strengthen our competitive position and improve the intrinsic value of our business, consistent with our fundamental approach to capital allocation.

Cimpress CFO Sean Quinn elaborated that consolidated revenue for the quarter was in line with expectations, thanks to continued strength at Vistaprint and "many of our brands around the world."

Quinn also noted that results were held back by the loss of "certain partner revenue" and -- as the company mentioned would be the case last quarter -- a reduction in Vistaprint shipping prices. In addition, Vistaprint's backlog increased due to flooding that shut down its largest production location near the end of the quarter, reducing constant-currency revenue growth by around 200 basis points for the segment.

Looking forward

Cimpress regularly reminds investors that it is "not targeting any specific revenue growth rates for any particular quarter or year." And for now, there are no changes to the organic investment spending plansthe company outlined last quarter.So in the end, while it might be frustrating when Cimpress's quarterly results don't stand up to those that Wall Street was projecting, I still think management is serving investors well by steadfastly pursuing their strategic long-term goals.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Cimpress. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.