Cimpress Announces Debt Transaction and Provides Preliminary Q3 FY2021 Financial Results

Cimpress plc announced plans to raise a senior secured Term Loan B of approximately $1.15 billion to repay existing secured debt and bring liquidity onto the balance sheet. The company is providing third quarter fiscal year 2021 preliminary results to facilitate marketing the transaction.

The secured Term Loan B is expected to consist of a $795 million USD tranche and a €300 million EUR tranche, both due 2028. Cimpress plans to use the new debt to redeem all of its 12% second lien notes due 2025, repay amounts drawn under its revolving credit facility and repay all borrowings in respect of the Term Loan A under its secured credit facility. The transaction will be approximately net leverage neutral on a pro-forma basis. The second lien notes will be redeemed at the first call date in mid-May 2021. The Term Loan A will terminate and Cimpress will retain a $250 million revolving credit facility maturing in 2026.

“It’s a good time to proactively implement this flexible capital structure,” said Sean Quinn, chief financial officer. “This transaction facilitates our refinancing of the second lien debt we secured at the height of pandemic uncertainty, and allows us to lower our weighted average cost of debt, diversify and expand our lender base by accessing the institutional loan market in Europe and the U.S., and extend the maturity profile of our secured debt. Our capital allocation priorities and financial leverage policy remain unchanged since our last public comments on February 24, 2021: our near-term priority remains organic investment. We see opportunities for M&A of smaller-scale businesses that would integrate into existing Cimpress businesses. We do not expect to pursue share repurchases or any large-scale M&A for the near-term future.”

Cimpress expects to allocate the Term Loan B transaction in late April 2021, and close in conjunction with the call date for the second lien notes in mid-May 2021.

Preliminary Third Quarter FY 2021 Financial Results

Cimpress’ results of operations for the three months ended March 31, 2021 have not been finalized and remain subject to change; however, based on information available as of April 14, 2021, Cimpress’ preliminary third quarter results are expected to be approximately as follows:

• Total revenue of $579 million, a 3% year-over-year decline. Year-over-year currency fluctuations benefited consolidated revenue by about 400 basis points, and acquisition timing benefited consolidated revenue by an additional 300 basis points. Please see the table below for the year-over-year change in reported revenue by segment through the quarter.
• Operating loss of $16 million. Within this, gross margin was down slightly year over year due to negative currency impacts, as well as product and acquisition-related mix impacts. Advertising as a percent of revenue was about 13% for the quarter. Operating income was impacted by $20 million of lease impairment expense related to the previously announced reduction of office space in our largest leased office facility in Waltham, MA, as well as for another location where our intended use of that leased facility has changed. Most of this impairment expense does not impact our cash flow in the current quarter. These changes to our leased facility footprint that prompted these expenses will result in material annual cash savings in future periods.
• Adjusted EBITDA of $55 million. This is a non-GAAP measure that excludes the following approximate items from the operating loss above: $43 million of depreciation and amortization expense, $10 million of share-based compensation, and $20 million of lease impairment expense described above. Additionally, adjusted EBITDA includes about $2 million of realized losses for currency derivatives that are included below operating income in our income statement. Inclusive of these realized hedging losses, year-over-year currency fluctuations had a negative impact of approximately $4 million on adjusted EBITDA.
• Total debt of $1,341 million, cash and cash equivalents of $36 million, and unused revolver of $516 million as of March 31, 2021.

Cimpress previously commented publicly on January and February 2021 consolidated bookings and in the second half of March 2021 we began lapping the impact of the COVID-19 pandemic on Cimpress’ financial results from the year-ago period. Therefore, below is a preliminary view of our reported revenue by segment during the third quarter, showing year-over-year growth in January and February combined, the month of March, and for the full quarter:

Click to enlarge.

Cimpress revenue results continue to vary by product line and region. We have begun to see recovery in the parts of the world where pandemic restrictions have been lifted or are less severe. For example, preliminary Vistaprint bookings in Australia grew approximately 10% for the third quarter, while bookings across European countries declined by approximately 7%; likewise, bookings from customers in less restricted U.S. states such as Florida, Texas, and Georgia are recovering more quickly compared to bookings in U.S. states such as California, Pennsylvania, or New York that have been more restricted.

“Amidst the on-going pandemic, we see much reason for optimism,” said Robert Keane, founder, chairman and chief executive officer. “Over the past year, we have demonstrated the variable nature of our cost structure, made permanent cost reductions and managed our liquidity prudently. Our team members answered a call for rapid new product introduction, and we continued to invest organically and inorganically to position our businesses to thrive as we come out of the pandemic. Though many small businesses continue to be impacted by local restrictions, small business formation has been resilient, and millions of people around the world are being vaccinated every day. We may continue to see some bumps in the road in the near term, but we are increasingly confident based on recent trends and we have an opportunity to continue growing our market share leveraging the investments we have made over recent years including through the pandemic.”

Cimpress expects to announce its full third quarter fiscal year 2021 financial results on April 28, 2021. Cimpress preliminary third quarter fiscal year 2021 financial results in this press release have been prepared by management based on currently available preliminary information. Accordingly, the actual results for the third quarter of fiscal year 2021 may differ from the preliminary results as a result of the completion of normal quarter-end accounting procedures and adjustments.

Cimpress has posted to ir.cimpress.com the marketing presentation and related non-GAAP reconciliations it plans to use for the Term Loan B transaction.

Source: Cimpress