All right. Good afternoon, everyone. My name is Steanos Crist from Needham Research. Welcome to the 21st TMT Consumer Conference. It's my pleasure to introduce Cimpress, and today we have Meredith Burns, VP of Investor Relations. We'll start with a presentation, and then move to Q&A.
Great.
Thank you.
Thank you so much. I'd like to thank the Needham team for hosting us here. I'm here with Colin Sprague, who is on my investor relations team as well as Cimpress. We're here to talk about Cimpress, the leader in print mass customization. I'd also like to say hello to people that are on the webcast as well. Before we get started, I'm definitely gonna talk about the future today. It's in the slides. We're gonna have some conversation about our expectations and sometimes what those expectations are may not actually come to pass because of risk factors that are outlined here on this slide, but also in much more detail in our SEC filings, including our 10-K and subsequent SEC filings from time to time.
We also have non-GAAP measures in this presentation, and you can find reconciliations to those non-GAAP measures on our investor relations website at ir.cimpress.com. Okay, let's get started. As I said, Cimpress is the leader in web-to-print mass customization. What that means from a customer perspective is that we can help millions of businesses and do help millions of businesses build their brands, stand out and grow via custom prints and promotional products. You can see some examples here. These are real customers with real products that our businesses sell out in the wild.
Many of our customers are small business customers or medium-sized business customers that have a need for, you know, to look professional just like big companies do, but they have smaller sized budgets, and they need quantities that are right sized for their type of, their type of business. We have, at Cimpress, a long history of market disruption that drives our financial results. What these two charts show on the left side is revenue, on the right side is adjusted EBITDA over the 20-year period since our initial public offering. A ctually, I'm just looking at this now. They actually start in 2011. It is not the 20-year period since our IPO. In any event, we're showing a long history of revenue growth.
The darker blue bars on each of those, each of these charts, here comes that forward-looking information, are our expectations. On the revenue chart, you can see our expectations for reported revenue growth for the current fiscal year that ends in June, of 9%-10% reported revenue growth. That is influenced by some acquisition growth and also currency benefits. The expectation that we have for organic constant currency growth for this fiscal year is 4%-5%. On the right side with adjusted EBITDA, you actually have two darker blue bars. The first is for $465 million in EBITDA that we expect in this fiscal year that ends here in June.
In the FY 2028 column here on the right side of the slide is our minimum expectation for adjusted EBITDA for FY 2028. We introduced this framework at the beginning of the year, we have reiterated it each quarter subsequently. That is for at least $600 million in adjusted EBITDA. I'll go into more detail on that longer term framework later on in the presentation. We are, as I mentioned, the leader in a large market. It is a $100 billion market in North America, Europe and Australia. That $100 billion market is the part of the market that is actually ripe for mass customization to come in and disrupt the market. It's small quantities of custom things.
It's medium quantities of custom things. What it is not is the commercial printing industry at large for large corporates. That is not the part of the market that we play in. We started in this industry with small format marketing materials like business cards or postcards or flyers. You can see in the pie chart on this slide, that is about 25% of the overall $100 billion market. Then you also have these other product categories that we have grown into over time by bringing the mass customization paradigm to new product categories like signage, like promotional products, apparel and gifts, and also packaging and labels. I'll go into a bit more detail about that in a minute.
One of the things that is interesting to think about, and, you know, maybe you can't see because it's a little bit detailed, is over on the left side of this slide. It talks about the relative penetration between the different types of products that are in this market space. You can see, the one that is, you know, sort of furthest along in terms of web-to-print penetration of this market is called Business ID. Business identity. That is things like business cards. Those have been in market longest. We think of them as more legacy products for us. Small businesses and medium-sized businesses are still using these products, but they're buying them in lower quantities than they did before, albeit with higher quality than they were before.
There are some nice features and finishing options that they are willing to pay a little bit more for. It's not where the bulk of our future growth is going to come from. That bulk of our future growth is coming from as I mentioned before, us bringing this paradigm to more and more product categories over time. The less mature parts of this market are also the parts of the market where web-to-print players like Cimpress have the least penetration today, and that is in areas like packaging, books, catalogs, magazines, sophisticated signage, and promotional products and apparel and gifts. This is a very fragmented market.
If you think about, like, who are our competitors, still today, after over two decades, three decades in this business, we have the bulk of the market still being served by the tens of thousands of small local print shops that you see in your neighborhoods and towns and cities every day. That has been a very slow and steady decline for those types of players in the space over decades. We would expect that that would continue to happen. They are ceding share because they're subscale players.
They're ceding share to scaled players like us and also others that use this web-to-print model to acquire a lot of customers and then push those orders through standardized production processes so that we can give them the benefit of scaled operations that a large corporate might get. Web-to-print mass customization is very special to us. It is a model that we invented. What it is really trying to break the trade-off that has typically happened between the concept of the quantities that you are producing something in and the price that you have to pay in order to per unit, in order to deliver that.
What web-to-print mass customization is producing custom products, even in small quantities, but with the quality and reliability and affordability that you would get from a mass-produced item. That is something that, you know, is very important to us. Customers care about it. They don't necessarily know that's what it is that's driving the economic engine behind our business and also helping them build their brands and stand out and grow.
They care about it because we are giving them the products with their beautiful designs that they have designed, their logos, their brand-building designs, with fast turnaround, with a really broad choice of the types of products that we offer, with low prices, with high quality, with the convenience of ordering online and getting it delivered right to your house in quantities that are right for small businesses. That is why customers care, and it's not easy to do. If you can imagine, serving millions and millions of the world's small businesses is a wonderful thing and it's gratifying, but it's hard because there are millions and millions of different companies with different design aesthetics and different brands and different logos and different needs all out there.
Serving them well at scale is hard, and it is really achieved through combining scaled capabilities across marketing and manufacturing and software and design, customer service, and product development. All of that has to come together and be orchestrated together in order to do a great job at this and delight our customers every day. This next slide shows a bit of a view into our reportable segments. We have these five reportable segments. The one that most investors are familiar with, and is our largest brand, it represents a little over half of our revenue, is Vistaprint. Vistaprint is the organic, the purely organic part of our business. It's the company that our founder, Robert Keane, founded and developed over time into this business.
The other segments that you see on this chart are businesses that we have acquired over time. Even though Vistaprint is the largest, all of these other businesses are driving great profits. They're driving great cash flows as well and have grown over time since we bought them. Together, we are, you know, $3.6 billion of revenue as of the trailing 12-month period ended in March in these different segments. We tend to operate our businesses in a bit of a decentralized manner so that each business can focus on the needs of their distinct customer base, so that we can actually serve a wider variety of customers.
The small businesses that Vista serves have different needs than the agencies and graphic designers and medium-sized businesses that our upload-and-print businesses in the PrintBrothers segment and The Print Group are serving. We like to have that autonomy in how we run our businesses in order to ensure that they're able to move fast in service of customers. At the same time, we have some centralized capabilities that each of our businesses can tap into, and that drives some of the scale advantages that I've been talking about, that we orchestrate and come together in order to deliver what we deliver on the economic side of the equation.
In fact, recently we made an announcement where, in our Vistaprint business, our National Pen business, and our BuildASign business, we're bringing those businesses a little bit closer together, in order to share more capabilities in manufacturing and marketing and engineering so that we can be more efficient and also have much more ability to launch new products quickly, at a more cost-effective, you know, with a more cost-effective model. That's an area where we are gonna be leaning into some of those shared services between those three businesses. Over on the right side of the slide is our geographic distribution. We're pretty evenly split between North America and Europe.
The remaining 4% of the revenue that isn't North America and Europe is in Australia, Brazil, and India. All right, moving on. What have we been up to as a business over the course of the last several years? We have made some transformational investments in our business, particularly in our Vistaprint business, but really in many of our businesses, and also at the center building, what we call our mass customization platform. We have over the course of the last six years, seven years, been through a pretty major technological transformation in the Vistaprint business, but also in some of our other businesses as well.
That re-platforming activity has enabled us to completely modernize our tech stack and to be AI-ready to make sure that we are taking advantage of opportunities that are available today that were not available when we started building these platforms a long time ago. Really helping us to enable our businesses working together more effectively, enabling us to lower costs, et cetera, and driving some advantages across the value chain. One of the things that it is helping us do is launch products more quickly. We are tapping into new growth and profit pools by launching these products. We call them elevated products. We call them that because they are the type of products that customers value very highly.
They are also a little bit more complex to produce, or maybe they're more complex to think about the design. You can see some packaging applications on this slide here, and that is a little bit tricky to get right. If we can make that easy for our customers, it really helps them elevate their brands and elevate their relationship with their customers. One of the sort of byproducts of doing that new product introduction is that it is allowing us to capture more wallet share with our customers. It is also allowing us to acquire new customers on a broader set of products, a more diversified set of products, which is a good thing. You know, we often get a question, "Oh, you know, how much of your business is still business cards," right?
Vistaprint was known for decades as being the place that you go and you get your business cards when you're a small business. We do still sell those, and we sell a lot of them, and we sell them profitably, and they're beautiful. It's not where the future growth of that business is coming from. It's coming from these elevated products, and they really are allowing us to capture more wallet share with these customers. Finally, on the manufacturing and supply chain front, we have advantages that we are basically doubling down from an investment perspective in right now to strengthen our moat.
It is, I think, important to know that though some areas of our value chain will be disrupted by AI, like, you know, design is changing, or the way that we're going to market in the future is changing because of AI, the core competitive advantage that we have in manufacturing and our supply chain excellence is not going to be disrupted by AI. We have a net positive influence from AI coming into the world because it won't disrupt the core advantage, and it can also make us more efficient in other parts of our business. I talked about elevated products. These are some examples on this slide, where you can see some packaging applications here. You can see booklets, catalogs, magazines, drinkware, apparel.
It, you know, there's wrapping paper, custom wrapping paper, all sorts of applications, signage, stickers. These are products that are growing very fast for us. Our customers love them. We have been investing in this in order to again, help penetrate into that wallet share. I'm gonna give you an example of that now. These are Vistaprint numbers. We see this type of thing across our businesses, but really in Vistaprint because of its history and where it came from with, you know, the most price-sensitive small businesses to where it is now serving all small businesses, but really doing a much, much better job of serving the needs of more demanding small businesses and higher value customers.
The difference over time, and this is showing a four-year period of time, the difference over time is the most noticeable within our Vistaprint business. What you have here, this is data that we showed at our Investor Day presentation back in September. It's not new. Over on the left side, what you see is three customer groups. On the left is the top two deciles of customers by variable gross profit per customer. What that means is it's the total variable gross profit in those two deciles. The top 20% of our customers are generating $750 million of variable gross profit for Vistaprint. You have the bottom eight deciles, that's the rest. That's obviously a lower number.
We're calling out specifically over on the right side of this chart the top two centiles. This is a subset of that $750 million of variable gross profit. There you can see that that is a little shy of $300 million of variable gross profit just coming from the top 2% of our customers. It is true that essentially the top 2% are generating the same amount of total variable gross profit as our bottom eight deciles. You can see the growth over that four-year period of time.
On the right, this is just a chart with the same three customer groups, but it's showing variable gross profit per customer, that's where you can really see how the top two centiles are standing out, where the variable gross profit per customer per year in those top two centiles averages about $1,400 per customer. We're still not talking about, like, huge customers, right? This is Vistaprint, where the average order value is about $90. You still have small customer needs, and you still have to have all of that, you know, great marketing and technology and manufacturing in order to deliver these custom products in the right quantities for those small businesses.
There's a big difference between, you know, $1,400 of variable gross profit per customer and, you know, the $300 or so from the top two deciles and the, you know, much smaller amount from the bottom eight deciles. Just an illustration showing over the last four years how we've been steadily growing, and that is really thanks to two things, the elevated products that we've been launching and also improvements that we have made to the customer experience in the Vista business, which is a direct outcome of that technology migration that we did several years ago. Of course, as I mentioned before, we continue to focus on manufacturing excellence.
These are pictures from within our manufacturing facilities, with some of the existing, more legacy-oriented products, but also some of the newer products that we have launched recently. You can see paper bags here. There's also some nice stickers and labels in one of the pictures as well. This is something that is important to us. It's a core competitive advantage. We wanna continue to strengthen it. The way that we've been doing that is by really taking advantage of the fact that we've gone through this technology migration. We can now connect all of our businesses together. We have connected our businesses together through our mass customization platform, and therefore, we can think differently about how we optimize across our network of manufacturing facilities.
You know, it's always been important to us to optimize within either a production cell or a value stream or a plant. Now, because these businesses are all connected to each other, we can optimize over that broader footprint within regions. We have been growing the amount of fulfillment that different Cimpress businesses do on behalf of each other. That's either when, you know, somebody is fulfilling for another brand or somebody is procuring a product to sell to their customers. That has been growing. That's what's showing on this chart. Last year in FY 2025, that generated an extra $15 million of variable gross profit in the form of COGS reductions for, you know, across Cimpress.
That's still pretty small compared to our overall COGS, but it is growing, and it's growing more rapidly since we have connected all of these businesses to our mass customization platform. It is allowing us to think about, you know, how do we have certain facilities and certain production flows that really specialize in a certain type of product, we call them focused production hubs, so that we can drive as much volume as possible in a region through those focused production hubs and lower the unit cost of production for all Cimpress businesses. That's really where our focus has been, and it's starting to pay off.
It is a big part of our plans in FY 2028 to grow our profitability even stronger. We do have also a strong balance sheet and liquidity. On the left side of this chart, you can just see the components of our net debt. We do have public debt in the form of Term Loan B and also high yield notes. Just as a side note, we did launch a refinancing of our Term Loan B this morning. That is really being opportunistic on notes that mature in 2028. You know, being able to, you know, extend the maturity, that's what we're looking to do with that refinance and that launch this morning.
Then over on the right side, you see our net leverage ratio. That's something that we have brought down coming out of the pandemic and the disruption that was caused with the pandemic and also that period of heavier organic investment that we were making there. More recently, we've kept that net leverage flatter, but we are on a path to de-levering to 2.5x trailing twelve-month EBITDA or below. We think we can actually get lower than that in FY 2028. That is while leaving room for capital allocation like share repurchases and also M&A.
I'll just also note here while we're hanging out on this slide that we have completed some really interesting M&A recently that has been tuck-in in nature, some vertical integration within our upload-and-print businesses or some additional volumes that we can add to our production facilities in order to really drive capacity utilization and some good outcomes there. We did yesterday announce an acquisition that was not included in our last earnings announcement of a couple of companies that had been owned by CEWE. They still are actually because this isn't gonna close for a little while. It was a definitive agreement announcement for SAXOPRINT and viaprinto. That is expected to close in the first half of our fiscal year 2027.
There's some regulatory hurdles that we need to jump through there. That is a really interesting acquisition because it comes with it a really state-of-the-art manufacturing capability from SAXOPRINT in Germany. That is something that we are going to boost the volumes that we are sending to that facility from other Cimpress businesses. We'll also be able to have those two brands launch new products from other Cimpress businesses. That cross Cimpress fulfillment is gonna come into play there and will drive the profitability and the cash flows much higher than that of the standalone business alone. Okay, getting to our outlook, this is our FY 2026 commentary. This was just raised on our earnings announcement on April 29th.
Our revenue growth is 9%-10% from a reported perspective. That's with currency benefit. It's also with some M&A benefit. Organic constant currency growth also was raised to 4%-5%. Profitability at least $87 million of net income and at least $465 million of adjusted EBITDA. From a free cash flow perspective, operating cash flow of approximately $298 million-$303 million, free cash flow, adjusted free cash flow of $130 million-$135 million. I talked about this FY 2028 number, we'll give a little bit more details here.
This is something that we introduced in September at our Investor Day, although we talked about the savings that we expect to result in this a little bit earlier than that, in, at the start of this fiscal year. We wanted to give this frame just in order to help people understand where all of these investments that we've been making from a CapEx perspective or from, you know, a customer experience perspective, from a new product introduction perspective, what is that actually going to help us yield? We've given this framework for a level of minimum profitability. We continue to say this is an at least number from an EBITDA perspective, $600 million at least in FY 2028.
That compares to $465 that we guided for this year and $433 million that we generated last year of EBITDA, so good growth on that front. Then, with free cash flow conversion of about 45% from that adjusted EBITDA. If we do $600 million, it would be about $270 million of adjusted free cash flow. You know, there are some different pillars that help us get there. We've talked about some of them today.
One of those sort of in aggregate is the concept of about $70 million- $80 million of savings or EBITDA efficiencies that will come through from a combination of these COGS benefits that I talked about from our focused production hubs, and cross Cimpress fulfillment, from Advertising efficiencies that we can get as we continue to penetrate into higher value customers and capture more wallet share, and amortize the acquisition cost of those customers. Also OpEx leverage that comes in the form of being more efficient about how we are delivering our results as we scale and as we apply AI and other types of automation and technology to our business. That $70 million- $80 million comes across all of those.
COGS is gonna be a meaningful piece of that. We've already actioned about $11 million of annualized cost savings on the OpEx side as well. That all is contemplated in this $70 million- $80 million number. Getting from $465 million to $600 million is gonna take a little bit more than that. We have some bridging items that we have been talking about this year in the form of plant startup costs that are gonna run off, in the form of some M&A that we've done that we've tucked in that comes with profits, in the form of some currency benefit that we've had.
Then, you know, really with this framework, what we talk about there is, all right, well, what do you have to believe about the flow-through of profitability from our organic growth in order to get to that $600 million? All year, that number keeps getting lower and lower. We are not aspiring only to deliver that type of flow-through. It would actually be pretty disappointing to us if our incremental margins were as low as what would be implied there. This is an exercise in helping people get comfortable with the growth that we see coming, when, you know, that is a bit of a different result from what we've had as we were investing and coming out of the pandemic.
Last slide is just to talk about our leverage policy, which is to target net leverage at or below approximately 2.5x trailing 12-month EBITDA. We may from time to time increase to about 3x for investments that we believe will have a good return, but also have a clear path to delever back under 2.5x or below. We are on this path. Our expectation is that we will exit FY 2027 at 2.5x or below, so that is next fiscal year. This fiscal year, we expect to be at 3x still.
If we achieve the minimum target for FY 2028, and you, like, play that forward in terms of how much EBITDA growth is that, how much free cash flow growth is that, and what does that yield in terms of cash on hand, that would actually allow us to delever meaningfully below 2x by the end of FY 2028, subject to capital allocation choices that we may make along the way. In any event, in concert with the leverage policy that is that is on this slide. With that, I am happy to take any questions. I hope that you agree that it's an exciting time at Cimpress, and happy to answer questions that you've got.
Could you talk about the puts and takes on AI? You said it was a headwind, but to me, like, my first thought a tailwind if consumers can design more.
Yeah
Can you just walk through?
You bet. Yeah. Question is on the puts and takes of AI. I did not mean to give an impression that AI would be a net headwind. We actually think that AI is a net tailwind for the company. There are some parts of our offering and how we do business that are gonna be disrupted. Design is one of those areas where, you know, many of our customers, not all, are not professional designers, and they need help with that.
I agree with you that, as it becomes easier and easier for regular folks, and small business owners to design beautiful things with the help of AI or with the help of AI-assisted design agents, that will be a positive for our core value proposition, which is putting those beautiful designs on physical things and getting those to those customers. I do think that, you know, there's a glide path there around, like, how does that change, how quickly does it change, how do we make sure that we're managing that appropriately and just helping customers wherever they are along that journey. Yes, I agree on the manufacturing side, that is a win, because democratization of design has been a huge tailwind for us, even though it wasn't AI-generated before. It was technology-enabled before.
Yeah, that is, that is a help. I think it's also a help in many areas across our P&L where we can get more efficient, and we're already seeing good examples of this. In marketing, we are using generative AI to develop marketing campaigns and rendering scenes with products in them, it's drastically cutting down the amount of time and resources that we need to create beautiful campaigns or merchandising products on our site, et cetera. We have also started to use it to begin to personalize the customer experience from ads to email to the site experience that they have with us as well, which is very exciting. Pretty early, but very exciting.
In other areas, from a software perspective, our engineers have been growing their use and experimenting quite a bit, but now really putting into production some AI enablements that allow them to automate certain steps along the way of product development, testing, QA, et cetera. In our G&A functions and in analytics, we have great capabilities in terms of, you know, really getting more efficient at analyzing data, using that data to make great decisions, and just get more efficient generally. AI will be a piece of the savings that will help us get to that $600 million. We haven't given specific guidance there in terms of, like, the amount in total that we expect to reduce.
I will say that the $11 million of cost that, annualized cost that we've recently taken out, some of that has been in these areas where we're already seeing good benefits from applying AI to drive efficiency.
Thank you.
Other questions?