Cimpress plc

Welcome to the SEMPRA's Q1 Fiscal Year 2024 Earnings Call. I will introduce Meredith Burns, Vice President of Investor Relations and Sustainability.

Thank you, Tanya, and thank you, everyone, for joining us. With us today are Robert Keene, our Founder, Chairman, and Chief Executive Officer, and Sean Quinn, EVP and Chief Financial Officer. I hope you all had a chance to read our earnings document published yesterday. We appreciate the time that you have dedicated to understand our results commentary, and outlook. This live Q&A session will last 45 minutes to an hour and will answer both pre-submitted and live questions. You can submit questions live via the questions and answers box at the bottom left of the screen. Before we start, I'll note that in this session, we will make statements about the future. Our actual results may differ materially from these statements due to risk factors that are outlined in detail in our SEC filings and the documents we published yesterday on our website. We've also published non-GAAP reconciliations of our financial results and outlook on our IR website. We invite you to read them. And so now I will turn things over to Sean for some brief remarks before we take questions.

Thanks a lot, Meredith, and thanks to everyone who's joined us today. Before we take questions, I'll just highlight a few key points from the financial results and also the updated outlook that we published yesterday. First of all, we delivered solid results in the first quarter. Consolidated revenue grew 8% on a reported basis and 4% on an organic constant currency basis. Growth did vary by segment, and it was also reduced by approximately 200 basis points from year-over-year revenue timing changes. Consolidated profits were very strong. Adjusted EBITDA grew $43 million year-over-year in Q1 to $89 million. Adjusted EBITDA margin was up from 6.5% last year to 11.7% this year. This benefited from gross margin expansion, from leverage in advertising spend, and reduced operating expenses. Adjusted EBITDA expansion over the last three quarters has been very significant. Our trailing 12-month adjusted EBITDA at the end of September was $383 million, and that compares to $228 million at the end of December, a 68% increase. increase in just nine months and still with significant benefit from our prior cost reductions yet to impact those reported results. Adjusted free cash flow for the quarter increased significantly year-over-year by just over $63 million with the higher adjusted EBITDA and also significantly more favorable net working capital compared to the year-ago period, which was helped by returns to more normalized inventory patterns. I won't go through all the segments here today, but given the significance of the profitability expansion in Vista, let me just share some highlights there. Vista's revenue grew 6% on an organic constant currency basis. Overall revenue growth was driven by approximately even contribution from growth in orders and then higher average order values. The higher average order value is driven by both product mix and pricing. Revenue grew across geographic markets and across product lines. with the fastest growth continuing to come from our promotional products, apparel and gifts category, signage, and packaging and labels. There's a lot of investor focus on Europe these days, and I'll note that for Vista, growth in Europe was quite strong in Q1. Vista's segment EBITDA grew $44 million versus last year, which, similar to last quarter, was driven by a balanced mix of revenue growth, gross margin expansion, lower advertising spend as a percentage of revenue, which decreased, and materially lower operating costs as a result of the cost reductions that we announced back in March. Importantly, in Vista, we're also seeing continued improvements in per customer value, which is a trend that's been in place for the past several years. But we're now also doing that while growing the customer base year over year, which grew by more than 100,000 customers in the first quarter. That was primarily driven by new customer growth, and those new customers generated record levels of in-quarter variable gross profit per customer when compared to past Q1 new customer cohorts. There are many small improvements that contribute to this, and there remains a lot of opportunity for more of these improvements, which can have a meaningful impact on our overall customer experience, conversion rate, and financial results, and that's where our focus is. From a balance sheet perspective, we ended the quarter with cash and marketable securities of $148 million, even after we purchased $21 million notional value of our 7% senior notes for just under $20 million. Net leverage decreased sequentially to just over 3.5 times trailing 12-month EBITDA as defined by our credit agreement. As we talked about on recent calls, from a balance sheet perspective, we've been prioritizing reduction in net leverage and that's happening at a good pace. Moving to our outlook, given our strong Q1 profitability and cash flow performance, we're raising our FY24 adjusted EBITDA guidance to at least $425 million, and we continue to expect that to convert to free cash flow at approximately 40%. Our organic constant currency revenue guidance of at least 6% remains unchanged. We recognize there's some macroeconomic uncertainty in most parts of the world, And we'll, of course, be monitoring that as it relates to future revenue commentary. Our expectation is still to end the year with net leverage that is below 3.25 times. So that also remains unchanged. And with that, Meredith, why don't we open it up for questions?