Cimpress reports mixed results for third quarter

May 1, 2019May 2, 2019 GaryPageau Cimpress, Vistaprint

Cimpress reported mixed results for the third, according to a letter to shareholders from chairman and CEO Robert S. Keane. Among the highlights:

Cimpress 3Q 2019 sales. Source: Cimpress investors letter

• Consolidated revenue grew 4% year over year in Q3 FY2019, and organic constant-currency revenue grew 3%, compared to 16% and 11%, respectively, in Q3 FY2018. This was largely driven by essentially flat revenue growth at Vistaprint, which we expected given the changes we announced last quarter. We also saw continued weakness in National Pen revenue growth, partially offset by a slight improvement in the trend for our Upload and Print businesses.

• Operating income was $29.6 million in Q3 FY2019 versus $16.6 million in the same period last year and Adjusted Net Operating Profit (NOP) was $55.2 million, versus $25.3 million last year. We are pleased with this demonstration of our ability to improve bottom-line results. Vistaprint was the largest contributor, largely driven by a reduction in advertising spend that we believe was not achieving acceptable ROI.

• Cash flow from operations was $17.0 million in Q3 FY2019, growing from ($32.1) million year over year, due in part to increased profitability, as well as the non-recurrence of $49.2 million of earn-out payments made in Q3 FY2018.

Changes to Vistaprint

The company is working to improve Vistaprint’s basic fundamentals:

Simpler and cleaner customer experience: We are ramping up efforts to reduce many small individual issues (bugs and glitches, localization, quality, packaging, merchandising and content, etc.) to reduce what we call “death by a thousand cuts” for our customers’ experience. In addition to the focus of existing teams, by the end of June we expect to have roughly doubled (from ~20 to ~40) the number of Vistaprint team members in merchandising operations who will attack a long backlog of issues in order to deliver a better, more consistent, baseline merchandising experience for our customers.
Decision-making frameworks and tools to ensure valid ROI criteria: Based on previously described corrective actions to our decision frameworks, we reduced Vistaprint’s advertising spend by $16.5 million, or 21%, year over year in the third quarter. Since we first started with tests that ramped up over the third quarter, we expect the year-over-year percentage reduction in advertising spends in the fourth quarter to be slightly greater.
Analytically driven marketing, merchandising and pricing: We began work to improve recognition of repeat visitors to our website, we increased the exposure of and the accuracy of cost of goods data that we use to estimate the profitability of customers, we invested in research that we believe will improve our attribution modeling, we recruited several key team members experienced in data sciences and marketing technology and ramped up recruiting efforts for more, and we began research on customer groups that should help us differentiate our customer experience in the future.
Increase development speed and value of engineers and analysts: Historically, Vistaprint’s technology was a strength that propelled a culture of data-driven decision making, rapid iteration and ubiquitous testing but it has deteriorated over time and does not achieve e-commerce best practices in terms of personalization, segmentation, data infrastructure, flexibility, testing, site speed or mobile. So we have started to build a completely new Vistaprint e-commerce platform that leverages third-party SAAS and the Cimpress mass customization platform (MCP). We expect to launch an end-to-end, early version in one of our smaller geographic markets this calendar year and to then progressively roll out to successively larger geographic markets over the following 18 to 24 months. Our expectation is that any temporary increase in technology expense associated with the new e-commerce platform will be funded by other savings from our recent Vistaprint changes.

The company also announced these changes were made in third quarter:

Since Maarten Wensveen, Cimpress’ chief technology officer, stepped in as interim CTO of Vistaprint as announced last quarter, we have reorganized the technology and analytics teams to support our objectives.
Sean Quinn, Cimpress’ chief financial officer, has stepped into an interim position as Vistaprint CFO
We have assigned a number of team members from Cimpress’ central finance, technology and other teams to support Vistaprint.
We have engaged external consulting support in areas such as brand management, user experience, pricing and organizational design.
We began external searches for several permanent Vistaprint executive roles, including a chief marketing officer, and are ramping up recruitment in technology, data sciences and analytics. Our team members have risen to the challenge, and I thank them for their hard work and dedication. Considering the importance of the work we’re doing in Vistaprint, I and several other senior executives will be maintaining our dual Vistaprint / Cimpress roles for the foreseeable future. Others across the rest of Cimpress are stepping up to take on additional responsibility to enable this focus and marshaling of resources for Vistaprint. Given the changes at Vistaprint and their import to our overall success I have focused this letter on Vistaprint, but note that, across Cimpress, we are proactively addressing the challenges that we discussed in our recent investor call, and we believe that we are taking the right steps to position ourselves for success company-wide.