Cimpress plc

to the SEMPRA's Q2 fiscal year 2024 earnings follow-up call. I will introduce Meredith Burns, Vice President of Investor Relations and Sustainability.

Thank you, Michelle. 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. We really appreciate the time that you have dedicated to understand our results, commentary, and outlook. This live Q&A session will last about 45 minutes 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 will note that in this session we'll 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 in the documents we published yesterday on our website. We also have published non-GAAP reconciliations for our financial results and outlook on our IR website. We invite you to read them. And now I will turn things over to Sean for some brief remarks before we take questions. Sean?

Thanks a lot, Meredith, and thanks to everyone who's joined us today or on the recording. Before I take your questions along with Robert and Meredith, I just want to highlight a few key points from the financial results and the updated outlook that we published yesterday. First of all, Sympress delivered strong results in the second quarter. Our consolidated revenue grew 9% on a reported basis and 6% on an organic constant currency basis. Adjusted EBITDA grew $55 million year-over-year in Q2 to $166 million, and adjusted EBITDA margins were up nearly 500 basis points to 18.1% this year with gross margin expansion, leverage in advertising spends, and reduced operating expenses. That was also helped by more favorable input costs compared to last year, and there were also a few beneficial year-over-year improvements that will not repeat that we called out in the earnings document as well. Adjusted pre-cash flow for the quarter increased significantly year-over-year by $96 million with the higher adjusted EBITDA, but also significantly more favorable net working capital compared to the year-ago period, which was helped by the normalization of our working capital trend. While we had growth in EBITDA across all of our segments, as you would have seen in the release, Vista experienced significant profitability expansion on strong results for its holiday peak. Vista's revenue grew 9% on an organic currency basis, which was better than expected. We saw strong growth across business product categories, but we also had 7% growth in our consumer products category. We continue to benefit from the range of improvements made in recent years that we talked about extensively in our last two investor days. Total customer count and also gross profit per customer both grew this quarter. So we're continuing that multi-year trend of improved per customer value, but with growth in total customers as we did in the first quarter. I think beyond the quarter, it's worth taking a step back for just a moment and reflecting on the last year. One year ago, our trailing 12-month adjusted EBITDA was $228 million. Now, at the end of December, it's $438 million, a 92% increase in one year, and that's still with material year-over-year benefits ahead next quarter from our prior cost reductions that haven't yet impacted reported results. One year ago, our net leverage was 5.5 times trailing 12-month EBITDA as defined by our credit agreement. Now it's 2.87 times, nearly half in one year. Importantly, we've achieved that while still maintaining significant organic investment. With two quarters remaining in the fiscal year, that puts us on a run rate that exceeds our prior profitability and net leverage guidance that we established for FY24, which we had already increased since we first introduced that more specific guidance one year ago. And lastly, one year ago, we had cash and marketable securities of $214 million. and we had no access to our revolving credit facility. Now, we ended December with cash and marketable securities of $291 million. We have full access to our $250 million revolving credit facility. And over that time in the last year, we also used $70 million of our capital to purchase $78 million of notional value of our high-yield note. Turning to our updated outlook for the full year, our organic constant currency revenue guidance for FY24 of at least 5% is consistent with what we experienced in the first half of the year and down slightly from our prior guidance of at least 6%. We think that's appropriate to reflect the lower than expected revenue growth that we've seen in our upload and print businesses and build assignments. Given our strong profitability and cashflow performance, We've raised our FY24 adjusted EBITDA guidance to at least $455 million, and we now expect that to convert to free cash flow at approximately 45%. That compares to our prior guidance of at least $425 million and conversion to free cash flow at approximately 40%. If you do the math of our trillion 12-month adjusted EBITDA as of December, And what we've already disclosed for year-over-year cost savings that we expect in the third quarter of approximately $25 million, and you back off the unfavorable currency impact for the remainder of the year that we've also disclosed, which is $8.5 million, that math will get you to $455 million. And so you might ask why our guidance is in higher after the extent of year-over-year growth we had in the first half of the year beyond those cost savings and unfavorable currency impact. The second half of the year is definitely a harder comp from a profitability perspective. I think if you look at the quarterly profile of last year's VISTA segment EBITDA margins, you'll see that. There were also a few benefits in Q2 we called out in the earnings document that we won't have again. That's not to say there's not opportunity for further growth in the second half of the year, but we've maintained this at-least construct, and we want to be realistic about where we set that. We're, as you know, incentivized to continue improving our business and our financial results, and that's what we'll remain focused on. Our boards also authorized share repurchases of up to $150 million, which doesn't have a defined timeframe set against it. Given the progress that I've just outlined, we're now in a position to have this as an option for capital allocation. Any share repurchases in the remainder of this fiscal year will be done with the expectation of exiting FY24 with net leverage at or below approximately 3.0 times trailing 12-month EBITDA as defined by our credit agreement. And I would note that that's an improvement from our prior net leverage guidance that we established at the beginning of the year of exiting FY24 at or below 3.25 times. With that, Meredith, why don't we open it up for questions?