Hi folks, again welcome to the 17th Annual Ideas Conference. My name is Erke. I'm with 3Part. Today we have Cimpress traded on the NASDAQ with the ticker CMPR. On behalf of the company, we have Meredith Burns.
Thank you. Hello everybody here in the room and also on the webcast. It's great to have you joining us today. My name is Meredith Burns. I'm the Vice President of Investor Relations and Sustainability at the company. I'd like to thank the team from 3Part Advisors for hosting us here. This is always a great conference, so we're very glad to be here. All right, before we get started, I'm definitely going to talk about the future. It's right in the slides, but I am not going to talk about the quarter that we're in right now. I'm not going to give an intra-quarter update, just setting that expectation up front. I will talk about the future and our longer-term plans. There are obviously risks to investing in the company.
They are outlined on this slide, but also in more detail in our SEC filings, and we invite you to take a look at those. Also, there are some non-GAAP numbers in this presentation, and we have non-GAAP reconciliations on our website as well, ir.cimpress.com. Cimpress helps millions of businesses build brands, stand out, and grow via custom print and promotional products like the ones that you see on this slide. We are very happy to help small businesses, medium businesses with their print needs, their marketing needs, their signage needs, logo apparel, other types of promotional products like drinkware, bags, as well as custom packaging and labels. We have a multi-decade track record of profitable growth at the company.
What you see on this slide is since FY 2004, which was the first year that we started reporting financial results publicly, all the way through this last fiscal year that ended in June this summer, FY 2025. The blue bar, part of the bar, represents our Vista business, you would know as Vistaprint. Our largest business is about half of our total revenue that we have grown organically over time. The gray bars represent the businesses that we have acquired over time and then subsequently grew through investment and growth there. The entire company's CAGR over this period of time, this 21-year period, is 21%. For Vista, the organic business, it's 18% during that period. It's been very profitable growth as well.
Over the course of the past 10 years, we have generated $2.3 billion in unlevered free cash flow, over $1.5 billion of adjusted free cash flow during that period. We take that cash flow as well as use our balance sheet in order to invest back into the business. We take a long-term capital allocation approach. Sitting on our board, we have about 30% of our shares represented in those discussions about strategy and capital allocation. We are very aligned with the needs of long-term shareholders as a result. Web-to-print mass customization, what is it? This is the concept of being able to provide custom products even in small quantities, which is very important with the reliability, quality, and affordability of something that is mass-produced.
We have historically broken the trade-off between something that has high unit costs when you produce it in low volumes and low unit costs when you produce it in high volumes. We're looking for the sweet spot of something that's mass customized where you can produce low volumes of something, but at unit costs that look more like mass-produced products. We've done that through the years, over decades, with multiple types of products. We started with paper-based products like business cards, but expanded that to other marketing materials, but then also signage and promotional products and logo apparel, and most recently into custom packaging.
Customers care about the concept of web-to-print mass customization because it helps them build their brand first and foremost, but we can provide them the way that we do this: fast turnaround, really broad selection of products, low prices, high quality, e-commerce convenience, and quantities that are right for businesses, even small businesses. We do that through the orchestration of a number of capabilities at scale, great talent driving advantages in manufacturing, software, design, advertising, service operations, and product development. We operate in a very large and very fragmented market, and we have grown over time by bringing the concept of mass customization to new product categories for smaller customers, and so giving them access to the same types of products that large corporates have had access to for a longer period of time.
On the right side of this slide, you see $100 billion plus TAM in North America, Europe, and Australia, broken out into the different product categories that we've talked about. On the left side of the slide, you can see sort of relative penetration of web-to-print into the space. It's a very fragmented space. Most of the value of what gets produced in the space is still with the tens of thousands of local print shops that operate around the world. Super, super fragmented, but web-to-print has penetrated over time. The place that's most mature is in business identity products like business cards, where you do have more penetration of web-to-print companies like Cimpress.
Then you see in all of these other areas on this slide, including books, catalogs, magazines, labels, packaging, signage, promotional products, the penetration of web-to-print into the space is still low, and that means that there's still a long runway for growth in the space in these new areas that we have been investing in. We call those newer areas, from a product perspective, elevated products. We call them that because customers tend to value them higher than our legacy products like business cards or postcards or flyers. They also allow us to capture more wallet share with the customers and therefore meet more of the needs of these customers. We've been investing in lots of new product introduction over the course of the last several years.
Some of the examples are on this slide, including paper bags, corrugated boxes, paper cups, drinkware, flexible packaging, sophisticated signage like trade show backdrops, roll label stickers, multi-page booklets, apparel expansion that we manage via an inventory light just-in-time capability, and then also new capabilities like getting these products into customers' hands faster. Same-day delivery for some customers in some locations, next-day delivery for folks in others. We really have been investing in this type of thing. The reason why we invest in it is because we know that as we have broadened our product capabilities, as we've gotten into these elevated products, it has allowed us to capture more wallet share with the highest value customers, regardless of which business we're talking about.
You've got somebody like Vistaprint that really focuses on small businesses, but there are very high-value customers within that small business space that are spending on these elevated products more and more. You've got folks in our upload and print businesses that are more professionals. They're probably larger companies, and they have known for a very long time that the broader the product selection, the more wallet share that you're able to capture with these higher-value customers. I'm not going to go into every single detail on the charts on this slide. This is something that we showed at our recent investor day in September, which if you're interested in Cimpress, I highly recommend taking a look at those slides. The video is on our website as well as the slides and the transcript from that event.
Basically what this shows is that over the course of the last four years, as we have really focused on launching these products in the Vistaprint business, it has enabled us every year to grow the variable gross profit coming from our highest deciles and also the variable gross profit per customer coming from those deciles. You also can see on this slide, on the left side, the top two centiles of customers for Vistaprint are delivering about the same amount of variable gross profit as the bottom eight deciles of customers. There is quite a skew here in terms of the value of these, and we really have been able to make progress here, and we think that there's a lot more runway to come on that.
Now, the reason why we are excited and in a position to really be making these changes and launching all of these products and really helping to strengthen the value proposition for our customers is because we have done the hard work of major technology replatforming in our businesses.
We have technology at the center that all of our businesses can leverage and orchestrate in different ways that are right for their business, their customers, that really help them with manufacturing, with new product introduction, with the user experience on the site, with data and understanding how to personalize better on the site, lower their fulfillment costs, automate manual tasks, and really with this shared IT infrastructure at the center for our businesses drive benefits to their customers in terms of the experience they have and the pricing and quality of the products that they get, but also benefits for Cimpress as well in terms of incremental revenue and expense reduction over time. This technology backbone is refreshed.
It's all new, modern, API, cloud-based, AI-ready, and it really is the reason why we are now able to accelerate our businesses working together and our new product introduction and being able to personalize the experience for customers better. One of those advantages that I just talked about is how do our businesses leverage each other's capabilities. As I mentioned earlier on, we have an organic business in Vistaprint that grew over time by historically really focusing on a relatively narrow set of products, but realizing over time that expanding the breadth and depth of those products was going to be beneficial to them.
We also had through acquisitions, businesses, particularly our upload and print businesses, but also some focused businesses like National Pen and BuildASign, where especially in the upload and print businesses, the product breadth was so great that we started to see the benefit of companies like Vistaprint actually tapping into those product capabilities from some of our other businesses and really getting some interesting benefits from it. One is new product introduction, but two, if you can actually focus your production into locations where you used to be doing it in a couple of different places, but now you can actually route all of those orders to the same location, you can actually lower the unit cost for everybody on a like-for-like basis as a result of pushing more volume through the machine.
On the other hand, you also have an opportunity to get product into customers' hands faster if you decide to, say, shift some volume to smaller plants that are closer to certain customer populations. Basically, the technology investment that we made has enabled our businesses to leverage each other's capabilities, and that opens up opportunity for us to think differently about where we produce things, how we produce them, and ultimately to lower COGS for us. We drove in FY2025, which is really sort of like still, we think at the beginning of this, we drove more than $15 million of incremental gross profit, and we think that that will continue to grow in the coming years.
We are investing today quite a bit in CapEx after multiple years of relatively low CapEx investment, looked more like maintenance CapEx investment for a while while we were doing that technology migration. Once the technology migration was done and we could shift our focus to what that enabled on the manufacturing side, we are investing quite a bit here, and we think that it is going to provide a lot of financial opportunity in the future. Just a quick slide on our segment and geographic mix. I have mentioned that we have both the organic business and Vistaprint, but then also acquired multiple businesses along the way.
PrintBrothers and the print group that you see on this slide are about 30% of our overall revenue, and those businesses that we have acquired over time have generated in excess, they've generated cash flow in excess of what we paid for those acquisitions, and they're still growing nicely. Last year they had 15% cash on cash return in the business, so there's a long runway for those acquisitions to continue to benefit the company. They were great acquisitions. National Pen on this slide is focused in promotional products, traditionally in writing instruments, but increasingly into bags and drinkware and apparel. In our all other businesses segment, the larger company in that segment is called BuildASign. They're actually based here in Austin, Texas, not in Dallas, but in Austin, Texas, in Texas.
Build-A-Sign has focused traditionally on just being incredibly efficient at production of signage and canvas prints. From a geography perspective, you can see we're fairly well distributed between North America and Europe, with a little bit of a sliver in other markets. What that is, is Australia, India, and Brazil. As I mentioned before, we take a long-term approach to capital allocation. Our focus is on per-share cash flows over time and improving those per-share cash flows over time. Our main focus from a capital allocation perspective is and has been organic investments in growth opportunities, but as we look at those, we think about capital allocation a bit fungibly, and we compare those opportunities to opportunities from an M&A perspective or opportunities from a share repurchase perspective as well.
In recent history, the share repurchases have really been attractive from our perspective, and we've balanced between organic growth and share repurchase with a little bit of tuck-in M&A activity, whereas in the more distant past, like FY2014 to FY2017, we were a little bit more focused on building out the group of businesses that we had through acquisition. Those acquisitions were a bit larger. You can see what we've been able to accomplish in terms of shares outstanding and bringing that number down over time through those share repurchases, and that is something that we consider to be an attractive opportunity still and hope to be in a position to be able to execute on that opportunistically. We have a strong capital structure as well with no near-term debt maturities.
We've refinanced our senior notes in September of 2024, and we repriced our term loan B twice in calendar 2024. We received a couple of upgrades from our rating agencies during that time as well, so very strong on this front with no near-term maturities. Our leverage ratio right now is the 3.1 times trailing 12-month EBITDA, and I am now going to transition into our goals to bring that down even further. As we look at the current fiscal year that we're in, we have a June 30 fiscal year, and we have just reported our Q1 results for FY26. We introduced this outlook commentary at the beginning of the fiscal year, over the summer, and with Q1 results, we reiterated our guidance.
We are expecting revenue growth of 5%-6%, and assuming that currency rates stay the same as they have recently, that would translate to organic constant currency growth of about 2%-3% this year, a little bit muted relative to where we think we can be and with some reasons for that. From a profitability perspective, net income of at least $72 million and adjusted EBITDA of at least $450 million, and operating cash flow of $310 million and adjusted free cash flow of $140 million. Through this, I'm not going to go into every single detail here, but it is in all of our documents on our website, but the other piece of data that we provided as guidance here for FY2026 is that we expect to exit the year with leverage slightly lower than where we are today at 3.1 times, inclusive of potential share repurchases.
Without those, we could probably get a little bit lower, but inclusive of potential share repurchases, we still think that we can make progress on delevering. The other thing that we've done recently at our September Investor Day was we released a framework for thinking about our financial results a couple of years out. The reason why we picked this date is because FY28 is going to be the first year that we should be achieving the full-year benefits of some of the COGS moves that we've been talking about and the investments that we've been making there, as well as the effect that that will have from an advertising efficiency perspective and some other OPEX changes that we can make.
We introduced a framework here to say that, hey, in FY2028, we think that we can be growing constant currency revenue between 4% and 6%, which is a little bit of an acceleration relative to our guidance for FY2026. We think that profitability can be net income of about at least $200 million and adjusted EBITDA of at least $600 million and adjusted free cash flow conversion from that EBITDA of about 45%. We gave a bit of a bridge on this guidance as well in order to sort of help people think about how we are thinking about this. If we achieve the minimum target of at least $600 million of EBITDA, that would yield an 11% CAGR for EBITDA growth from FY2025 to 2028, which would represent margin expansion from about 13% EBITDA margin to 15% EBITDA margin just with sort of those numbers.
Now, we have plans internally to do better than this, and we walked people through at our investor day sort of like, what do you have to believe in order to get to that at least $600 million level? We start here on the left with the results that we delivered in FY2025, the $433 million of adjusted EBITDA, and then we just bridge to our FY2026 guidance, which is at least $450 million. The growth in FY2026 is not huge. The reason for that actually is that some of the investments that we're making right now are weighing on our profitability, including some plant startup costs. Once we get out from under those and those have lots of volume flowing through those plants, that will give us a much better opportunity to see the benefits flowing through our financial statements.
You get to the $450 million, and then a few things that we've talked about in our annual letter at the very beginning of this year in July, we talked about the fact that all of these changes that we are making and these investments that we've been making in our business are going to allow us to take out between $70 million and $80 million of cost exiting FY2027. This is the first year in FY2028 that we think that we'll be getting the annualized benefit of all of those. That is the $75 million, the midpoint that you see here. The plant startup costs here in FY2026 that are burdening our P&L this year is about $15 million. That should run off between then and into FY2028. We have some near-term tuck-in M&A contribution that is certain and should benefit us.
We decided we would not normally put that in here, but because it is certain, we decided to put that in here as well of about $10 million. We also have a pretty robust currency hedging program whereby we contract out our rates in advance for our largest exposures of euro and pound two years in advance. Into this FY28 period, we actually know that we should be getting about $10 million or so of currency impact as well. Once you add all of that stuff up, in order to get to $600 million, you only have to deliver $40 million of contribution profit from organic growth because remember, we also expect to be growing during this time.
Now, that is, and I can hear our CFO, Sean Quinn, in my ear saying, "Make sure that you tell them that that is coming at an incremental margin that we would be disappointed with. We think that we can do better than that, but that is what would be required in order to get to the 600." The natural byproduct of achieving these results would be significant delevering. In FY28, if we hit the $600 million and the resulting cash flow at 45% conversion, we would be meaningfully below two times trailing 12-month EBITDA, subject to capital allocation choices such as share repurchases. Along that path in FY27, exiting that year, we would expect to be at approximately two and a half times trailing 12-month EBITDA, which is our, just from a policy perspective, that's our target.
Not to say that we target that amount to keep it there from an optimization perspective, but more that we would expect to want to operate in that two and a half times leverage or below in order to have enough dry powder to execute on the types of capital allocation choices that we would like to. With that, I would like to thank you again for your time and your interest in Cimpress. If you have any questions, I'd be happy to take them now. If you have a desire to learn more about the company, we have a lot of great information on our website. Let's get into some questions. Yes.
I know you have a lot of businesses in a lot of end markets, but what is sort of the manufacturing footprint?
How much, if any, is made in the United States or China, or how much is made in the end markets where you're selling or anything like that?
Great. The question for the webcast crowd is, what does our manufacturing footprint look like globally? How much is in the U.S. versus other locations? It's a mix, for sure. We have manufacturing facilities, some in the U.S., but also in Canada, Mexico. We have multiple plants in many European countries as well through the acquisitions that we've done in the upload and print space. We have one in India. We have one in Australia. We have one in Brazil as well. In terms of, I think I will anticipate where this question is coming from on your behalf. In terms of the U.S. footprint, we have a plant in Reno. We have a plant in Terre Haute, Indiana.
We have a plant in Austin, Texas. We have a new plant outside of Pittsburgh. It is also true that most of what we sell to U.S. customers is coming from plants in Canada and Mexico. Now, we have a special situation at Cimpress where almost all of the revenue or the computed value of the products that we're shipping into U.S. customers is exempt from tariffs. About 90% is exempt from tariffs. That is partially because a lot of what we sell are considered to be informational products, and you can't put a tax on information. At least you can't use the Emergency Powers Act to do so. The other piece is that those plants in Canada and Mexico are producing products that are USMCA compliant.
Really, the exposure that we have and that we've been dealing with from a tariff perspective is on the type of products that don't get substantially transformed in one of our plants. If you think about something like a water bottle like Colin has in front of him over here, that water bottle that has a beautiful Cimpress logo on it that we produced in our Vistaprint plant in Windsor, Canada, it was a water bottle before we decorated it. The function of it did not change through our decoration of it, even though it looks better now. Therefore, the country of origin stays when you don't substantially transform something, the country of origin stays with where you got that from. That likely came from China.
Where we have been dealing with new tariffs has been really specifically in our promotional products and apparel products. We have been managing it through a combination of moving our purchasing to different locations that have lower tariff rates as well as raising prices in order to cover the additional expense. We've been successful on that front. We have essentially offset the increased tariff through pricing changes with the exception of the period of time that was right around when the tariff rate on Chinese goods was 145%. In that quarter, we had about a $3 million impact. We have baked in some profitability pressure this year of about $5 million. We are comfortable that we can operate effectively within that.
Other questions?
Sure.
I've seen a lot of your competitors drop shipping things from China and India.
Is there any take any of the 45-hour market?
The question is a really good one. For the webcast crowd, the question is, is there a benefit of the tariff situation for us relative to competitors? I will say, at a minimum, it's not a hurt because if you are in the promotional products industry selling to U.S. customers, by and large, you are sourcing all of that stuff from another country. There's very little that actually gets produced here in the U.S. today. We sort of are all on even footing at the start. If you go beyond that into, what advantages might we have relative to others, it's some of the stuff where you go outside of the promotional product space where this is a little bit of an interesting nuance to all of this tariff stuff.
If you do substantially transform a product in a USMCA compliant plant that is not in the United States and then send it to the US, that is not tariffed. Also, because you might be sourcing the raw materials into that other country, say like a Mexico or a Canada, you do not have to pay the tariff on the original substrate in those products that you are substantially transforming. In a way, it actually is not, it certainly in some cases does not achieve what was set out to be achieved by bringing manufacturing into the US because there are some places where it actually might make more sense not to be. Yeah, it is very complicated and it is really like product by product, very, very fascinating situation that was thrust upon us all. Yes.
I'd like to know which risks you all identify that you'd like investors to watch and be wary of. What could go wrong with this?
This is such a great question. I've been asked which risks are most material and which ones are the ones that our investors should be watching. I think that we are in a moment where there is a lot changing because of AI, and it is going to move in ways that we cannot fully predict right now. That is going to have an impact in how you attract customers, how you sell to those customers, and it also is impacting the world of design. Now, in the world of design space, I think it's a net positive for us, even though it could be a little disruptive along the way, a little bumpy, because we offer design services to our customers.
Ultimately, where we get our economic value from and what our customers see as the most important thing is the delivery of beautiful physical products that they feel proud of, that have their branding on it. That is not something that AI is going to disrupt in a negative way. Even if AI changes the way that people design things, if it makes it easier for people to design things, then it will make it easier for us to put those on to physical products. That could be, I think it could be a net positive, but I do think that there could be some disruption along the way. On the advertising front, we do not know exactly what it is going to look like. I feel like we are in a good position because we are the player of scale in our space.
We have a lot of smart people at the company that wake up every day thinking about where is this going to go and how do we leave our options open to be able to be flexible as this plays out. It is true that five years from now, we may be engaging with our customers not via a website primarily anymore. It may be like agent to agent. That is a very different world, and you might need to solve for different things in terms of being able to come up in search in an advantageous position. That is something that we are watching for sure, and we are working to mitigate those risks. It's funny, as I was talking, I was remembering our lawyers always tell us when you're talking about the risks in our risk factors, you never talk about mitigation. You talk about the risks.
These are the risks of investing in our business, and we could be wrong about these things. Of course, I just told you about mitigating things as well, which hopefully you would want to know. No, we haven't webcast this to everybody.