In a letter to shareholders, Cimpress Chairman and CEO Robert S. Keane called the company’s second quarter “a poor quarter, the worst in a long time.”
“As you will recall, we were also disappointed with our revenue growth last quarter,” wrote Keane. “Our deteriorating performance over the past six plus months led to some serious soul searching about the root causes and what we will do about them. Many of our challenges are within our control as described in this letter. Others are external in nature: competitors that drive up the cost of advertising and drive down the price to customers, and key input costs such as paper are increasing.”
Overall, here are the highlights of the company’s second-quarter financial performance:
- Consolidated revenue grew 8% year over year in Q2 FY2019, and organic constant-currency revenue grew 6%, compared to 32% and 11%, respectively, in Q2 FY2018.
- Vistaprint’s reported revenue growth was 1% and organic constant-currency revenue growth was 3%.
- Vistaprint consumer product bookings, which represent a larger percentage of bookings in December quarter, declined by about 2% in constant currency.
- Operating income was $90.6 million in Q2 FY2019 versus $72.7 million in the same period last year and Adjusted Net Operating Profit (NOP) was $115.1 million, versus $93.7 million last year. These headline figures mask underlying weakness since they include a reversal of $15.4 million in share-based compensation expense, a $12.0 million timing-related benefit of the adoption of a new accounting standard, and the first-time inclusion of BuildASign profits.
- Cash flow from operations was $183.3 million and free cash flow was $154.8 million in Q2 FY2019, growing year over year, respectively, from $160.4 million and $132.7 million. However, these increases were primarily driven by working capital favorability and the addition of BuildASign.
Cimpress’ Vistaprint business has been making strides for improvement, reported Keane, but is still lagging in key areas of customer experience, in marketing and analytics, in merchandising and pricing, and in decision-making processes. He announced the departure of Vistaprint CEO Trynka Shineman, with Keane taking on her duties until a successor is named. (Keane will also reduce his cash compensation to the legally required minimum salary of $455 per week.)
Keane added Cimpress’ poor results weren’t all on Vistaprint’s ledger. He also expects improvement from the Upload and Print, National Pen and other businesses.