Cimpress plc

Moat: 2/5

Understandability: 4/5

Balance Sheet Health: 3/5

Cimpress plc is a mass customization company, that empowers businesses and individuals to create customized marketing products, websites, and other related services in large volumes and relatively small order sizes.

Investor Relations Previous Earnings Calls

The moat, understandability, and balance sheet health scores reflect a conservative evaluation to ensure a margin of safety in any assessment.

Business Overview

Cimpress operates in the mass customization industry, enabling businesses and individuals to create and order customized products like business cards, signage, promotional items, packaging, and apparel.

  • Revenue Distribution: Cimpress reports their financials based on reporting segments. They’re as follows: Cimpress’ business is managed through four operating segments: Vistaprint, The Print Group, National Pen, and All Other Businesses
    • Vistaprint: Offers a wide range of marketing products and services primarily to micro and small businesses and consumers, utilizing a vertically integrated manufacturing and supply chain.
    • The Print Group: Focused on print manufacturing, offering specialized services to other businesses, including print resellers. It contains many separate businesses mostly based in Europe.
    • National Pen: Specializes in providing custom-branded promotional pens and related items to micro and small businesses.
    • All Other Businesses: A collection of various smaller businesses with unique specializations, including but not limited to Tradeprint, Vida Systems, and BuildASign.

  • Industry Trends: The printing industry faces challenges of commoditization, requiring mass customization to remain competitive. The company cites a large and fragmented market opportunity in the mass customization space.

  • Margins: Cimpress aims to improve its operating and net profit margins through operational efficiency, acquisitions, and debt reduction. However, in recent periods, the company has struggled with rising input costs, especially paper and labor costs, negatively affecting EBITDA.

  • Competitive Landscape: While the company sees itself as unique, the market has many competitors, though with varying scales and business models.
  • What Makes Cimpress Different: The company’s mass customization platform, and scale, and cost advantage is what they believe differentiates themselves from the competition.

Financials

  • Revenue Trends: Cimpress has demonstrated revenue growth, particularly through acquisitions and organic growth. They are projecting revenue to be $3.45 Billion and an Adjusted EBITDA of over $500 Million in 2024. While sales have been strong, the company faces risks from the volatility in exchange rates, because much of their revenue comes from Europe.

  • Profitability: Over the course of the last 12 months, the company has reported a Net Income of $-62884 and EBIT of $141110. The company is seeing their Free Cash Flow increase.

  • Debt: The debt balance sheet is what lowers the company’s balance sheet health rating the most. While Cimpress has a sizable debt burden, management states that this is largely under control, although high interest rates may pose an issue. It was reported as 1.35B in the 2023 report.

  • Recent Performance & Outlook: The company has shown improved margins and strong sales volume that are improving to new levels. The company is projecting revenue of $3.45 Billion and $500+ Million adjusted EBITDA in 2024.

Moat Analysis

  • Weak Moat: Cirmpress faces tough competition. This industry is also prone to fluctuations. While it’s possible for moats to be built in commoditized areas, it requires outstanding innovation and great management. The company also has large long term debt and faces risks from economic slowdowns in Europe, a key part of their sales.
    • **Scale Advantages: ** Cimpress attempts to leverage scale, but faces competition from large, established players.
    • Switching Costs: The company does not have significant switching costs that can provide protection.
    • Network Effect: Cimpress is attempting to build this effect, but that will take time to come into fruition.

    Moat Rating: 2 / 5

Risks & Business Resilience

  • Economic Slowdowns: A downturn in the global economy could affect demand for Cimpress’ products. The rising interest rates in 2023 and 2024 may also pose an issue.

  • Technological Disruption: Changes in technology related to printing can cause issues with the company’s specialized hardware, reducing margins.

  • Operational Challenges: A large number of facilities and supply-chain partners increase operational complexity.

    Business Resilience: To face this problem, the company has plans to focus on higher-value-add opportunities and to grow in the promotional products segment.

Understandability

Understandability: 4 / 5

While the company is easy to understand on the surface, the company has many complex product offerings, business segments, and international exposure, leading to this 4 / 5 rating.

Balance Sheet Health

Balance Sheet Health: 3 / 5

The company does have a sizable debt load and has had negative equity in the past. Given these risks, they have an appropriate health rating of 3/5. However, the company continues to focus on reducing net debt and leveraging their scale to make sure that the business is still robust and financially strong.