Cimpress plc

Welcome to the SimPress Q4 fiscal year 2026 earnings call. I will now introduce Meredith Burns, Vice President of Investor Relations and Sustainability.

Thank you, Ari, and thank you everyone for joining us. With us today are Robert Keane, our Founder, Chairman, and Chief Executive Officer, and Sean Quinn, our EVP and Chief Financial Officer. We appreciate the time that you've dedicated to understand our results, the commentary, and outlook, particularly at year end. This live Q&A session will last about 45 minutes or so and will answer both pre-submitted and live questions. You can submit questions 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 earnings document we published yesterday on our website. We also have published non-GAAP reconciliations for our financial results on our IR website and we invite you to read all of those. So now I'll turn things over to Robert.

Hi everyone. Thank you very much for joining us today and it's great to be here. Meredith, thank you. I want to start with my perspective on the strong progress that we've made against the strategic and the operational themes that we've been pursuing for a while now. Then Sean is going to take you through our Q4 results and our updated guidance. We made great progress in fiscal 2026, right along the path that we've been describing for the past few years. That's true of our strategic objectives, manufacturing and supply chain excellence, elevated products, and design enablement. and it's true of our ways of working. The handful of shared capabilities like our mass customization platform, our velocity and our efficiency. I gave a lot of examples in my annual letter, so I won't go through them again here, but I'd really encourage you to read it. It lays out these themes and where we're investing to grow revenue and take out cost. For those of you who have not yet read the letter, There's one thing I want to call out, our new strategic partnership with Canva. Canva is one of the largest design platforms in the world. Hundreds of millions of people use it every month. We've launched a first set of Vistaprint branded products in Canada and the US. And by the end of September, we'll have expanded that range significantly and we'll have gone live in more than 25 additional countries. Canva is a real leader in artificial intelligence and Canva AI will plug directly into SimPress systems. There's a deep technical integration. So a customer can go from a design prompt to a professionally produced print ready Vistaprint product without ever leaving Canva. That gives us a meaningful new on-ramp to customers at scale and it gives Canva a production partner it can trust for its print shop strategy. It's a real growth opportunity for both companies. The strategic partnership is in its early days and we're excited about where this can go. I'm sure you'll have questions but I'll tell you up front we can't share much more today because of the confidentiality terms of the partnership. One more piece of progress that's worth speaking about today is since Our last call, we did close on the acquisition of Saxoprint. The logic here is simple. Saxoprint gives us a high-capability, focused production hub, exactly the kind of asset our cross-SynPress fulfillment strategy is built on. It will strengthen Print Brothers directly in the near term, and over the longer, I'd say mid-term, the value will extend beyond Print Brothers across our European businesses. It's another deliberate step in building the shared production capabilities and capacity that make the whole of Sympress network stronger. We're excited to have SaxoPrint on our team. So let's step back to the big picture of where Sympress is overall. First, the momentum we built this past year puts us in a strong position to deliver our profitability and free cash flow commitments through fiscal and the investments we're making will keep those metrics growing well beyond 2028. Second, our competitive advantages are significant. We have thousands of talented, dedicated people all pulling in the same direction on strategy, on operations, on our financial goals. And every year we give our customers more value. No competitor matches our scale. and none matches our ability or our willingness to keep investing in new product categories and in world-class manufacturing and supply chain. Third, ever since our startup days, we've harnessed digital technologies and software to create real value for customers while driving down costs. And AI is going to be a very exciting next chapter in that long history. but here's the thing, we've always made our money by producing customized physical products better than anyone else. These are real, tangible things. So even as AI speeds up the velocity with which we can create value and take out cost, it does not threaten our core economic engine. That engine is a huge growing range of customized physical products that we produce every day with high quality, low cost, and Fast Turnaround. So to sum it up, SimPress is executing well against the plans I laid out in my investor letter a year ago, in which our executive team walked you through in more detail at our investor day last September. And those plans build on years of work and the investment before that. We're building real capabilities and real advantages, ones that let us serve customers better, and keep up our multi-decade disruption of a very large, very fragmented market for customized marketing products and branded merchandise. Better profitability will show the intrinsic value that we're building per share and will deliver it without ever losing sight of the long term. Our path ahead is clear. On the numbers, this progress has let us raise our at least target for 2028 fiscal 2028 to 615 million dollars of adjusted EBITDA with free cash flow conversion of around 45 percent now let me be clear about why we share a multi-year EBITDA target it is not because EBITDA is our top objective it isn't our top objective is and has always been to intrinsic value per share. We share EBITDA as a target because it's public, it's measurable, it's a milestone on the path to much higher cash flow per share, and it holds us accountable. And it gives you a concrete way to track our progress. And I want to be direct about this. We would not chase this target through decisions we thought sacrificed intrinsic value per share for the near term. We just wouldn't do that, but we strongly believe that we can see multiple years of EBITDA expansion compatible with our intrinsic value for share objectives. With that, I'll hand it over to Sean to walk through the quarter and our financial outlook for the next two years.

Sean? Great. Thanks, Robert, and thanks, everyone, for joining us today. As Robert said, fiscal year 2026 was a strong year for SimPress. We're on the right path operationally. and importantly we have cohesive plans for delivering on what we've laid out for the next two years in our fiscal 27 guidance and also our increased fiscal 28 targets. The full year revenue in fiscal 2026 reached $3.74 billion up 10% on a reported basis and 4% on an organic constant currency basis. Adjusted EBITDA grew 6% for the year and that was getting us to $458.5 million in total. For Q4, consolidated revenue grew 9% on a reported basis and 3% on an organic constant currency basis. We continue to see good progress in our ability to better serve high value customers. One of the best indications of that is the continued variable gross profit per customer growth in Vistaprint, which we've been reporting throughout this year, and that increased 9% year over year, continuing that multi-year trend. For the quarter, adjusted EBITDA was $120.4 million. As noted in yesterday's release, Q4 profitability was impacted by a few items outside of our core operations. We had $7.1 million in higher startup costs for our North American manufacturing network build out. We had $4.7 million right off of Canadian duty drawback receivables that were actively contesting after a longstanding ruling was revoked and that happened right at the end of the quarter. and we had 1.8 million dollars of inventory write downs and all that was partially offset by the IEPA tariff refunds that we had in the quarter of 6.9 million dollars. Relative to guidance we came in below where we expected the duty drawback topic the inventory write downs and also an adjustment that was necessary for variable long-term incentives all came up at the very end of the quarter that was about 10 million dollars of negative impact on adjusted EBITDA We also had two other smaller items. The impact of currency was less favorable than we had expected just based on changes in rates from the end of April when we had updated guidance. And then we had transaction costs for the Saxaprin acquisition as well. The two of those combined about $2 million. Candidly, that's a lot of noise there. As demonstrated from our go-forward guidance that I'll review in a moment, these topics don't change our charted profitability and cash flow growth path. Adjusted free cash flow was $70.5 million for Q4, and it was $122.4 million for the year. As we've discussed throughout the year, this reflects our higher manufacturing capital expenditures, all those to drive unit cost reductions and also expand elevated product capacity and capabilities. Networking capital was a significant inflow in Q4 as it normally is, but for the full year, the impact of networking capital was an $11 million use of cash. which we expected to be a small inflow for the year that's just timing nothing structural there but that was the other impact relative to our full year guidance we ended fiscal 2026 in a strong balance sheet position net leverage was 2.9 times trailing 12 months EBITDA is calculated based on our credit agreement that was consistent with what we guided to throughout the year and that's down from 3.1 times at the end of fiscal 2025 our liquidity remains robust we had 249 million dollars in cash and cash equivalents at the end of the year we also have our 250 million dollar revolving credit facility and i should note that we during the quarter closed on a new 1.1 billion dollar term loan b that's now due 2033 and replaces our prior term loan b that was due in 2028. so turning to our outlook now our fiscal 2027 guidance reflects strong continued financial momentum and also significant growth in profitability and cash generation. Specifically, we expect reported revenue growth of at least 7% on an organic constant currency basis that's 3%, net income of at least $125 million, adjusted EBITDA of at least $520 million that represents over 13% growth year over year, and then operating cash flow of approximately $370 million. and adjusted pre-cash flow of approximately 200 million. That's also significant growth year over year. In the earnings document, we provided some additional commentary that you might find helpful just as the assumptions and context for our fiscal 2027 guidance. I'm not gonna go through all that here, but I thought it might be useful to just provide a high level bridge from where we ended up fiscal 2026 at $458.5 million of adjusted EBITDA to the guidance of at least 520 million for next year. And the first one is, as we noted in our release yesterday, the contribution from M&A. So we had a number of recent token acquisitions. We expect those to contribute $18 million to $21 million in incremental adjusted EBITDA growth. So that is the growth year over year. The revenue attached to those is $165 million to $175 million in fiscal 27. And all that incremental EBITDA is both the full year run rate earnings from the standalone businesses but also the initial synergy realization as well which will be ramping throughout the year. From a currency standpoint we do expect currency to be favorable in fiscal 27 based on current exchange rates and also our contracted hedges currency is expected to provide a five to ten million dollar positive year-over-year impact on profitability which that is contracted so we have visibility to that and then the remaining 31 to 39 million dollars of adjusted EBITDA growth comes from a combination of the contribution from organic growth but also all the cost efficiencies that we're executing on as we've been outlining over the last year. And those cost efficiencies include both the structural cost of goods sold reductions that are driven by cross and press fulfillment and focus production hubs and also the investments that we've been making throughout our production network, but also operating expense savings, including the full year impact of actions that have already been taken in fiscal 26. On the cash flow side, in fiscal 27, we expect CapEx and capitalized software will remain at similar levels to fiscal 26, while lower cash taxes and the adjusted EBITDA growth that I just outlined will drive the significant growth in adjusted free cash flow to the $200 million. Just quickly on the topic of tariffs as it relates to fiscal 27, the trade environment remains dynamic. There were two new US tariff measures announced last week. The first one is the Broadway section 301 tariffs of 10% to 12 and a half percent. Those have already taken effect and those replaced the 10% global tariff rate that had expired that same day that these went into effect. Our outlook had already, assumed the 10% continuation of the section 301 duties previously and so this one is in essence built into our guidance. The second one is the 50% tariff on certain Canadian goods under section 338 and those were announced to take effect on August 19th. Given the implementation uncertainties we haven't included those section 338 tariffs in our guidance But of course, we've been doing plenty of work on this. Our preliminary review shows that these duties would affect a small portion of products fulfilled in Canada for U.S. customers, and we're actively operationalizing supply chain and fulfillment adjustments to mitigate a substantial portion of any prospective cost impact. As hopefully has been clear over the last year and a half, I think our team has done a great job being dynamic and addressing these changes as needed when they come up. Turning to our fiscal 28 targets, we remain confident, as Robert said, in our organic constant currency revenue growth expectation of 4% to 6%. But importantly, in yesterday's release, we raised our fiscal 28 profitability and cash flow targets to net income of at least $192 million, adjusted EBITDA raised to at least $615 million, up from our prior target of at least $600 million, and then adjusted free cash flow conversion of approximately 45%, which is consistent with our prior guidance, but on the higher EBITDA base implies roughly $275 million in adjusted free cash flow. The primary driver of this target increase is a higher expected contribution from M&A compared to our prior remarks, and that's based on the transactions that have closed over the last few quarters. Otherwise, I'd say we remain on track for the other components required to deliver against this at least, and that's important, at least target. namely the cost savings previously outlined the runoff of plant startup costs which as noted for fiscal 26 were sizable the favorable currency impact and then the contribution from organic growth that's required to bridge the remainder achieving these targets will drive a meaningful reduction in our debt leverage as well we continue to expect net leverage to decrease to approximately two and a half times exiting fiscal 27 on the way to be meaningfully below 2.0 times by the end of fiscal 28, all subject to capital allocation choices such as share repurchases. With that, Meredith, why don't we open it up for questions?

Thanks, Sean. As a reminder, you can submit questions during this webcast via the questions and answers box at the bottom left of the screen. We've also had pre-submitted questions, and then we'll mix some live questions in as well. We've had some overlapping questions. So let's jump to our first one. Robert, this one's going to be for you. Actually, there's a couple questions on Canva, unsurprisingly. Robert, can you expand more on the economics and nature of the partnership with Canva? Why was now the time to enter this strategic partnership? And how big could the Canva strategic partnership be? How much does Canva benefit your FY27 and FY28 guidance?

Okay, well, thank you. Let me start with the nature of the partnership. This is a deep technical integration. Both Canva and Sympress, first and foremost, we worry about the value we bring to customers, empowering our customers to do great things that make them really proud of what they've designed and printed, in our case, printed. But right underneath that, supporting that commitment is incredibly high quality software talent at both companies. And a key aspect of this partnership is that we have the technology chops, the technology talent to work as an equal partner with Canva. And our engineers are working together every day. We've actually built a dedicated team in Australia that includes great engineers who've been part of our tech team since we acquired 99designs five years ago. And that's really valuable to both parties given that Sydney is the headquarters of Canva and we are able to work very closely with them. So our ability to work at high speed as a tech talent equal differentiates us. I'd say that's the overwhelming nature of the partnership that you don't see from the surface. Second, the nature of the partnership is this huge breadth of depth and products in markets and geographies across the world including are brands, Vistaprint in the future, Princhy in Brazil in the very near future, that customers know and trust. And that's important for Canva, I believe, I can't speak for them, in having brands that customers recognize and trust. So in summary, all of the organic investment and the acquisitions as well that we've done over the last 12 years have gotten us to a place where we've been in a very good are all positioned to work with Canva, and that includes our technology and our product and our service operations investments. As to why is this a good time now, and also why is it good for both parties, again, I can't speak for Canva, but I can say some things that are for us, certainly, and then what they've spoken about publicly. Both companies have in the past two years so evolve how we think about this intersection of design and print. I wrote in the letter last night, we spoke last year at our investor day in September about design enablement and we see that design is being democratized, that customers have a wide choice of design tools. They're certainly our own excellent print focus tools but they include third party tools and increasingly generative AI and they bring a capability or choice to customers to design any way they want and they can move fluidly they want to move fluidly between these and we recognize and embrace that kind of cross tool fluidity so our aim is customer happiness rather than trying to lock anyone into our own proprietary tools and hundreds of millions of customers per month design a canva primarily for digital applications like social media and presentations but clearly many of them also want to produce physical manifestations of their designs and canva is therefore very important for us in our design democratization understanding and i would add that canva really is at the leading edge of bringing artificial intelligence capabilities into design so again Sticking to the words you can see Canva say for themselves, they have at Canva Create, their annual launch event, spoken about a launch of a print shop where they recognize print as an increasingly key aspect of their full suite of the types of products that they want to empower their customers to design on, from presentations and social media to many other digital media, but including the physical world. And only SimPress has the breadth, the depth, the quality, the cost effectiveness or the cost competitiveness and the geographic custom coverage of customized printed printed products. So again, I think from a wise good time for both parties, we both had slight evolutions in our respective strategies at the intersection of print and design. As to economics, I noted in my comments, we can't share more today because of the confidentiality terms of the partnership. and because it's in its early days, just let me say that we think, and I believe Canva very much thinks, this is an opportunity to provide great value to our customers and in doing so to be very economically attractive to our shareholders. One thing which is obvious, so it's not confidential, but just to be clear, we do gain a major channel to reach customers that we haven't had before and we think that is economically attractive. so i'll close by saying our past 10 or 12 years we've been making huge investments in technology modernization in the mass customization platform in new product introductions and production efficiency and competitiveness and geographic expansion in moving towards higher value customers and i think that those investments are very healthy for simpress overall but this canva partnership is a third party specialist expert evaluation of how valuable those investments have been. And so we think it in many ways reinforces our belief that we've been on the right path making these investments over the past years.

Thank you, Robert. Great. Next question that we had come in, Sean, what are the drivers of growth acceleration between FY27 and 28? organic constant currency revenue growth of at least three percent in fy27 and four to six in fy28 also what accounts for the lowered net income guide for fy28 to at least 192 it had been 200 million before many thanks yeah okay um yeah on the growth side i mean i think um you know first of all like you when we set our guidance for fiscal 27 we want to set that at a level that we feel very comfortable with and i think

Despite some of the noise at the end of Q4 there from an adjusted EBITDA perspective, you see this in terms of how we established guidance in fiscal 26 and then performed against that. For recall, we started out fiscal 26 with revenue guidance growth of 2% to 3% organic, and we ended up at 4%. So as we enter fiscal 27, We want to take a similar approach for the growth rate, at least 3%. That does imply a slight deceleration from what we did for the full year of fiscal 26. It is consistent with what we did for Q4. Again, we want to set that at the appropriate level. As we turn to fiscal 28, and we've been talking about 4% to 6%, what can drive that acceleration? I think there are a number of things. you know this isn't where I would naturally start but given Robert was just talking about the relationship with Canva of course new channels like that would be would be one one driver but from an organic perspective you know we've been making a lot of investments it is a big capex year fiscal 26 it will be another big capex year fiscal 27 a lot of that is for efficiency drivers but there's a big part of it that is also for growth drivers in terms of expanding our elevated products capabilities and capacity things like pushing further into packaging for example you know is a great example of a new new growth driver so that is really what drives the organic acceleration it is the continued push into further and further into elevated products as we do that we're almost sort of entering into new markets within the context of our total addressable market and then the new channels like I said like canva as an example On the net income front, to be honest, there's not much to read into that. The net income, even though we increased our fiscal 28 adjusted EBITDA target, the net income as a starting point went down a little bit. There's a few pieces to that just in terms of our gap results. There's a little bit of higher depreciation, but there's amortization from the recent M&A that we've done. There's some small changes to our GAAP tax expense, but that doesn't flow through to changes in our cash taxes. So I really wouldn't read too much into that, just some small tweaks from a GAAP perspective.

Thank you, Sean. All right, Robert, a couple of questions for you on the topic of mergers and acquisitions. First, what have been the main lessons from past M&A successes and failures, and how does that relate to why The M&A that we did in FY26 made sense. And how should we think about the shift to more M&A in FY26 compared to 24 and 25? Is there now an opportunity set that is opened up that didn't exist before? Or was it simply that there were other capital allocation opportunities that were more compelling in FY24 and 25, for example, Sherry Purchases?

Okay let me start with the lessons and start with the lessons of our mistakes which are we don't have time on the call to go through all my mistakes in my life but let's talk about I mean I think one don't stray into digital or into new geographies where both of those really didn't match what we were excellent at let me talk about digital over the multiple decades those who followed us we've been attracted to webs to get into websites, ourselves, deposit photos, and Crello, which is now Vista Create, because it was obvious to us from our customer need that customers wanted to design and project their brand and their image in digital spaces as well as in physical spaces. And we just found, in retrospect, the competition there, the focus needed there, we did not have the capabilities to really lead. and frankly, the valuations in those markets for acquisitions are very elevated. And so we found that those didn't work. And then I'd say geographically, although today we're very optimistic about what we're doing in Brazil, in India, especially with the partnerships with people at Canva, the economics there have been very tough for us. And I'd say that we also, for those again who followed us for multiple decades, Our early attempts to go into China and Japan just really made it, I think, were not successes. So stick to our knitting of print in geographic markets where we already are there. So where we've been really successful, I think it's been a great way to bring in capabilities of just product and talent that we don't have or to strengthen talent and product ranges we have. Examples of that are certainly getting into upload and print which today is really a critical part of our business and a very important part and growing part of SEMPRESS overall getting into packaging promotional product areas where we've we've just seen although we've talked about national pen not being the type of ROI we really would have wanted to have when you actually look at the non-quantifiable benefits of getting into A very strong supply chain for promotional products. It's been very helpful. So I think it's a capability building. And an important lesson is avoid paying anything other than very reasonable multiples of cash flow and EBITDA. And I think that maybe is a lesson that applies to anyone in any M&A world. so you know how do we think about the shift uh uh towards this i wouldn't call it a shift i think there's there are many different opportunities in the uh in the spectrum of capital allocation we have ranging from just keeping dry powder for future uh to share buybacks to organic investment we do think about those all as fungible um the types of acquisitions we've been doing right now and i think very much represent what we'd be doing in the future. Our tuck-in acquisitions where we're buying relatively small businesses directly related to what we do as a business in the areas I just mentioned. And I think our future acquisitions to the extent we do them will follow that pattern.

Thank you, Robert. All right, moving on to a question for Sean. Sean, can you clarify or expand on expectations for incremental returns on invested capital organically and via M&A, especially as CapEx normalizes working capital as a source of funds in the coming years?

Sure. And I think the reference to working capital and CapEx normalization is just a I think that speaks to the kind of access to capital that we'll have beyond fiscal 28. So I think in terms of organic incremental returns, one, we've been very happy with what we've been seeing, including in the fiscal 26 organic investments that we've been making, CapEx and manufacturing and supply chain being probably the main domain where those investments are being made, but of course not exclusive to that. When you look at the results, our aggregate results get weighed down by things like the startup costs that are attached to that that have a near-term impact on earnings. But as we deliver on both the cost reductions that we've outlined as some of those startup costs come off, as we make more progress pushing into elevated products, growing with high-value customers, I think Those strong returns on the organic investments that we've been making recently will start to shine through a bit more, and that's actually a big part of the fiscal 28 targets that we have. I'm starting to really see that come through and also see that come through in the form of higher EBITDA margins because the incremental returns on organic investment have more impact. um and i think you know at a consolidated level like i said that sometimes gets uh that well that gets blended in and also with parts of the business that have you know less growth we talk about legacy products in some places declining um and uh and we'll see we'll see more impact from the incremental returns on invested capital organically that we've been doing but also from an m a perspective um you know our last investor day we shared uh on the capex side which is a big part of those investments um some specific examples of the return on invested capital for those investments. And you can see if you look back to those, you know, they're generally 20% plus type returns. Many of them, you know, also quite fast paybacks. And so, you know, these are pretty obvious investments that we would want to continue to make. And we think we'll have continued opportunities to make, you know, well beyond a fiscal 28 from a CapEx perspective. On the M&A side of things, You know, we've said that for the recent M&A that we've done, I think we said this for each of the four that we've announced over the last six to eight months or so, that we expect to generate base case returns on capital that are well in excess of 20%. And I think that for those types of tuck-in acquisitions, and Robert just talked about some of the learnings that we've had on the M&A front, I think that's a pretty fair benchmark for what we would expect as we think about both the standalone businesses, but also the synergies we can bring. And we do plan to go through this in a bit more detail in our September Investor Day, just explaining kind of the economics of these token acquisitions and giving you some of the kind of archetypes of what we think makes sense, but also going through some of the numbers of recent ones that we've done so you can see what the returns have been there. and then you know I think as we get out to fiscal 28 and free cash flow increases I think this maybe is the point of the question you combine that with lower net leverage you know we'll have ample capital to reinvest whether it be in organic investments whether it be in you know some tuck-in M&A share repurchases you know we can pay down debt and like you know we'll be patient on that and we'll evaluate all those opportunities on a relative basis but We kind of like these layers of possible avenues to reinvest capital at high rates after fiscal 28 when we'll have a lot more available capital to do so.

Thank you, Sean. All right. We've had some questions on our market opportunity and our future opportunity. So I've got a representative one that covers all the bases here for you, Robert. Can you provide some color on the runway and length of time you see beyond FY2028 in terms of continued growth and cash flow per share as you address the TAM that you've outlined in past investor days? Conceptually, is this TAM growing or declining over time? And does it even matter given the degree of white space?

Well, thank you. We see a long runway for continued cash flow growth well beyond 2028. And we're going to be leveraging our competitive scale across this huge market. I'll come back to the TAM in one moment, but the investments we've made over the past several years, over the past decade, in modernizing our technology, in repositioning Vistaprint, moving into elevated product categories, really position us to sustain growth past our fiscal and all 28 targets in terms of EBITDA but also cash flow. And the direction of cash flow will clearly be up into the right as far as we believe. And there will probably be annual fluctuations, especially in cash flow. But we definitely also believe that we are going to be able to avoid the major cash flow swings that we've seen in the past five to seven years, which we had as we navigated the pandemic, the subsequent supply chain inflation and while doing so said we were going to continue on our commitment to invest in tech migration and the repositioning of Vistaprint during that those tough times so I think looking forward to that continued growth in cash flow per share definitely up into the right with much less volatility than we've seen in the past although some annual fluctuations in cash flow I think are probably We're very optimistic. As to our TAM, you're right. It's about what we see. It is what we think it's been for quite some time, roughly $100 billion. But there are underlying product categories that are shifting. So products like promotional products, logo apparel, packaging are pretty much growing with GDP at the market level. we're growing much faster than that whereas legacy print categories like business cards or flyers are slowly declining but when you put all that together the market is steady to slightly growing and our investments in moving into elevated products are really getting us into a lot of those markets that are not not facing the headwinds we see in some of our legacy products We're also getting into markets that are much less penetrated from an online perspective. So that's why we really believe that wallet share of our existing customers is a big driver of how we can drive into that TAM, as well as, of course, getting to new customers, including our own customer acquisition channels and partnerships like we are doing with Canvas. I agree with your question, which said something to the effect of given the size of this white space, does it really matter? It doesn't really matter. We're a roughly $4 billion company over the coming 12 months and $100 billion market. So what's most critical is continuing our low-cost producer status through manufacturing efficiencies and scale and having incredible customer value across the user experience.

Thanks, Robert. I'm going to follow up quickly while we're talking about TAM because we've got another question that I think is related. What do you think about the TAM of high-value customers and how much share you currently have with those customers?

So I would respectfully disagree with what I think is the premise of the question. High-value customers are already in our We have huge numbers of customers who are not high value customers for us who are buying a lot of print products elsewhere. And so wallet share is a key part of our growth into this TAM. And so HVCs are part of our TAM of $100 billion. And in the past, because we didn't have the broad product line, because we didn't have the focus on that, especially at Vistaprint and I would say even at some of the Build-A-Sign properties, we focused more on these lower value relationships, as you call them, instead of customers, where we were selling $50, $100, $150 a year to customers. And we're shifting to selling customers thousands of dollars per year. but they're one and the same of the same TAM.

Thanks, Robert. Helpful clarification there. All right, Sean, another question for you. How should we think about the level of run rate maintenance capex after this growth period is completed as compared to where it is currently? Is there a percentage of growth capex that is almost certain to get converted to ongoing maintenance going forward post-2027, 2028?

Yeah, I'll start with the latter part of the question. And I think, I think, yeah, part of that will, but also, yeah, as revenue grows, I think the right way to think about it is that maintenance capex should still stay around around one and a half percent of revenue. And, and that's been, you know, on average, the case, you know, for, for a bit. I think you know what we're going through now you know we've in fiscal 20 yeah actually starting in fiscal 25 but certainly in fiscal 26 and again in fiscal 27 you know we've had some pretty significant build out of new facilities and you know if you go back into our history you know for obvious reasons you see these kind of elevated levels or spikes in our capex you know when we are building out new facilities again for obvious reasons and then that you know kind of settles back down um the um uh and that's that's what we're going through now and in fiscal 28 we do we do as i said uh earlier um we do expect our capex levels to decrease in absolute dollars from fiscal 26 and 27 levels but then also as a percentage of revenue of course you know be down even further um yeah i think the the other the other thing that plays into this is is m a and you can also see this in our historical trends you know when we for example started to buy into what is now our upload and print portfolio because of the capacity that that offered and as we started to in more recent years you know get more capacity utilization because of our initiatives and with simpress across the press fulfillment that's enabled maintenance capex to come down some because we're getting better capacity utilization and I expect that will only improve but also with some of the more recent M&A that we've done and could do in the future in terms of tuck-in acquisitions that also serves to somewhat lower that maintenance capex as well. So that's kind of the story, but I think as we get to fiscal 28, we'll see that moderation and then we'll get back to levels that are pretty consistent with where we've been in our recent past.

Thanks, Sean. And of course, that was all capex from a physical capex perspective. I'm going to follow up just so that you can hit on capitalized software as well as our investors tend to want to understand what the trends are there too. So if you could just make a couple comments on that from the team perspective.

Yes, we expect that to be basically flat year over year in 27. And I think as we look forward, that's another in that kind of walk from our profitability to free cash flow. That's another area I expect us to continue to get leverage. And I think all of our efforts from an AI perspective are part of that as well, but I expect us to be able to get leverage out of that line, either not seeing much growth or maybe even opportunity to actually lower that given all the benefits of AI in terms of how development's done. So that would be the path there.

Thank you so much, Sean. Robert, we've got one more question in the queue here. Just going to ask you if there's been any changes in the competitive landscape recently.

No, it really has not been at all. It's been very consistent. I'd certainly say post-pandemic. We did see, I'd have to think back when it was, a time long ago where we were seeing what we felt was pretty irrational pricing in the European uplage in print that has very much dissipated. We live in a very, very competitive world, but I think that's healthy. It makes us better. It keeps us hyper-focused on just improving our customer value, but there's no macro change. If I try to quantify or describe that a little more detail, we live in a world where the vast majority of printers and sign shops and promotional product distributors are less than 10 employees and 90% of them are less than 100 employees. And if you look at the big companies in printing and packaging, promotional products, they don't serve small customers well. They don't even really want to serve them. Even what we consider high value customers, again, someone who might order several thousand dollars a year from us on average, Those are tiny customers for what the big print and packaging and promotional product companies target where they're going after enterprises. So I would say that there's no change to that broad description of the competitive landscape and we're still very optimistic about our opportunity to continue to take market share.

Great. And just as a point of clarification, that more intense competitive irrational behavior in the European market was pre-pandemic in around 2019 time frame and the pandemic actually helped to quiet that down quite a bit.

Thank you for that update.

All right Robert I'm going to turn it back over to you for closing remarks.

Thank you Meredith and let me leave you all with the few things that I think matter the most. First The strategy we're winning with is the same one we've been pursuing for years in describing to you all along higher value customers, elevated products, manufacturing excellence, and design enablement. We're not changing course. It's working. Second, in fiscal 26, we kept strengthening the value we delivered to customers, driving up efficiency and picking up the velocity with which we make improvements. Third, our path is clear. We're building leading capabilities and real competitive advantages, the kind that let us serve customers better and keep our multi-decade disruption of a very large, very fragmented market for customized marketing products and branded merchandise. Fourth, the investments we've made over the past in technology modernization and in product expansion and in many other areas are paying off on more than one front. They've positioned us to win organically. They've created clear synergy opportunities for tuck-in M&A. And now they've attracted a major strategic partner in Canva, a company that is better than anyone in the world to evaluate just how unique Sempress is given our combination of our technology, our product range, our manufacturing, and many more. And fifth on the financials, we're confident we'll hit our newly raised fiscal 28 at least profitability target along with the cash flow conversion and leverage reduction we've laid out for you before. One housekeeping item that I want to Touch on before I close, please do save the date on your calendar for our annual investor day. That's September 30th, 2026 from 8 a.m. to 11 a.m. Eastern. And with that, thank you for joining our call and thank you for continuing to entrust your capital with us.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.